EU: Budget
	 — 
	Question

Lord Campbell of Alloway: To ask Her Majesty's Government whether, as the United Kingdom's net contribution to the European Community budget is projected to rise from £2 billion in 2008-09 to £6.5 billion in 2010-11, they will withhold a proportion pending a statement of assurance on the accounts by the Court of Auditors.

Lord Davies of Oldham: My Lords, the answer is no. The United Kingdom is required to make its contributions under obligations imposed by the treaties. The European Communities Act, and Section 2 in particular, gives effect within the UK to Community law. Inability to gain clearance on the majority of EU expenditure is unacceptable, and the Government will continue to engage with European institutions over these issues and to look for member states taking greater responsibility for the EU funds that they manage.

Lord Campbell of Alloway: My Lords, I am grateful to the noble Lord for his response, but with respect, it does not go to the essence of the problem. Does the Minister agree that the problem is that there is no regime for the presentation of these accounts, which is the basis of these projected increases to the budget? Some regime ought to be established with the agreement of the Court of Auditors, which for the past 14 years has refused to give a statement of assurance on grounds that the accounts are deficient as excluding waste, fraud and mismanagement. I have taken rather a lot of time so I will not ask another question.

Lord Davies of Oldham: My Lords, the noble Lord identifies a desirable state of affairs, but it is difficult to get from this position to the one that he outlines. It is clear that there is steady improvement with the accounts, but that does not alter the fact that it is unacceptable that the Court of Auditors has been unable to give a positive statement. However, as recently as 2003 only 6 per cent of the accounts were given a positive opinion by the auditors and last year it was up to 40 per cent, so there is improvement.

Lord Tomlinson: My Lords, does my noble friend agree that hidden within this Question something needs to be looked at, which is the statement of assurance itself? Would he reflect and come back to us on the possibility of encouraging Her Majesty's Government and other Governments to set up a committee of statistical experts to look at the sampling system that is used for the statement of assurance, which is regarded by many, including some members of the European Parliament Budgets Committee, as inadequate? There is a statistical job to be done so can he undertake to raise that with fellow members of the Government?

Lord Davies of Oldham: My Lords, my noble friend, as ever, is constructive in his suggestion, and certainly we will look at his proposal. Knowing as much as he does about the European Union, he will know that our major priority must be to improve financial management by constructively engaging with the Commission on the issue, particularly in increasing the responsibility of member states for the expenditure.

Lord Waddington: My Lords, would the noble Lord help us by saying to what extent the increase in the British contribution is due to the abandonment by the Government of the rebate deal so painstakingly negotiated by my noble friend Lady Thatcher?

Lord Davies of Oldham: My Lords, the noble Lord will be aware that the abatement still holds its value as far as agriculture is concerned. There is a small increase in the budget as a result of the changes to the value of the abatement, but I think that he will recognise that other factors play their part, not least the relationship between sterling and the euro, which pushes figures up. I must tell the House that in terms of the overall expenditure of Britain, these are relatively marginal figures.

Lord Pearson of Rannoch: My Lords, in addition to our withholding our hard-earned cash, is it not about time that the European Union apologised to and compensated its former chief accountant, Marta Andreasen, who was sacked simply because she refused to sign off its fraudulent accounts and who has since been treated disgracefully?

Lord Davies of Oldham: My Lords, I think that that is a matter of opinion. The noble Lord has articulated that position for several years. The response of the European Community and the British Government to that position is that his views are, at the very least, somewhat contestable.

Lord Newby: My Lords, does the Minister accept that everyone in the House supports the Government's attempt to get better financial management in the EU? Does he further agree that if ever there were a week not to be sabre-rattling, as proposed in the Question, this is that week, when we are attempting through the G20 and thereafter to get the EU to work together in fiscal stimuli, management of financial institutions and climate change?

Lord Davies of Oldham: My Lords, I am grateful to the noble Lord. He builds on the response from the Council of Ministers, which was the basis for a Statement in this House by my noble friend the Leader of the House only last week on the constructive way in which the European Union is playing its part in the strategy that needs to be followed for recovery from the recession. The European Union is a very large economic unit indeed—it is the largest single market in the world. Its position with regard to the strategy to be employed for recovery is of the greatest importance. We should rejoice in the fact that there is a unity of purpose in that respect.

Baroness Noakes: My Lords, the suggestion from the Liberal Democrats that we should not sabre-rattle does not sit very well against the fact that in respect of structural funds, there is an 11 per cent fraud or error rate and, in respect of the CAP, the figure is 2 to 5 per cent. Those are big figures and way beyond any statistical error problems, as suggested by the noble Lord, Lord Tomlinson. If the Government will not use their ability to withhold funds from the EU, as suggested by my noble friend, what practical things will they do to get change, because change must happen?

Lord Davies of Oldham: My Lords, withholding our funds is not an option. That would be to take our bat, go home and sulk rather than stay in the game. If we are to get improvements to the accounts in Europe, which we must do, the important thing is to reinforce all those who want a more perceptive approach to those accounts on the part of those who spend money in Europe. The crucial thing is that all member states have an interest in that matter. The problem in the past has perhaps been that they have not exercised their authority with sufficient force. We intend to do so.

Homelessness: Rough Sleepers
	 — 
	Question

Baroness Scott of Needham Market: To ask Her Majesty's Government whether they plan to review the criteria for counting rough sleepers.

Baroness Andrews: My Lords, as part of the new rough sleeping strategy, No One Left Out, we are bringing in changes that will clarify the scope of the count and enable more in-depth reporting of the level and nature of need in different areas.

Baroness Scott of Needham Market: My Lords, is the Minister aware that many people who work in the homelessness sector struggle to reconcile government figures with what they see on the streets, and that one reason for this is the way in which they are instructed to count? For example, someone must be bedded down in the same place for two consecutive nights, and counters are forbidden from going into dark and secluded places, which is exactly where rough sleepers tend to hide. Would it not be better if the emphasis went on finding and helping them instead of counting them?

Baroness Andrews: My Lords, I certainly agree that the emphasis must be on finding and helping them, which is exactly what we are doing. The counts might not capture all those who sleep rough, but because the methodology has been applied consistently from area to area and year on year, it is the most accurate measure of the relative scale of the problem and the change over time. Those are not my words; they are those of the National Audit Office. Its figures show that, in 1998, 1,850 people were sleeping rough and that, in June 2008, there were 483. That is significant progress. It is recognised across the voluntary sector, but it is only a platform for our ambition to get rid of rough sleeping by 2012.

Lord Roberts of Llandudno: My Lords, I am sure that we all appreciate the work done by voluntary organisations in helping rough sleepers, but in this economic recession what additional resources will the Government give to these organisations to help them to meet the needs of what is likely to be a larger number of people who, because of repossessions and so on, will find themselves on the streets?

Baroness Andrews: My Lords, I had the privilege on Friday of visiting Shelter's advice centre in Chatham, where I saw the excellent work that Shelter and other voluntary agencies are doing. The noble Lord is quite right. We are aware that what is happening in the economy is likely to lead to a loss of jobs and a loss of homes, which is why we brought forward the mortgage rescue package of £200 million, the mortgage support packages, which are led by lenders, and so on. We have also increased the money going into advice for these shelters, which are very grateful for that. When I talk about our ambition to get rid of rough sleeping by 2012, I should say that in addition to refining the count, we are setting up a streets audit to look at the exact individual help that rough sleepers will need—they are all very different—and how we can best offer that.

The Earl of Listowel: My Lords, does the Minister keep separate figures for the number of young people under the age of 25 who have left public care and are rough sleepers? Is she doing all she can to improve access to appropriate, good-quality supported accommodation for young people leaving care?

Baroness Andrews: My Lords, we do not have separate figures, but I can tell the noble Earl—I know he has a real interest in this issue—that one of our cross-cutting targets, PSA 16, has identified children who are coming out of care and who we know make up a large proportion of people on the streets. Such people have multiple problems, including mental health problems and addiction problems, and we have identified them as a particular target in the provision of housing. We find that these young people turn up regularly in places such as the Passage in London, and we really do have a care for them.

Baroness Gardner of Parkes: My Lords, what is the position at the moment in central London? While local authorities in central London always felt that they should do what they could to help people, they found that the situation in some areas was very frightening for tourists, so they tried to find ways of helping that would relieve the tourist situation as well.

Baroness Andrews: My Lords, it is true that London has roughly half the country's rough sleepers. Part of the challenge is to stop people coming to London in the first place, which is why we are investing £200 million in homelessness prevention services across the country. Westminster has a particularly acute problem because it is in a way the depot for the A10 groups of people coming from eastern Europe. That is why we have put additional resources into Westminster to help, for example, people reconnect to services in their home countries, and so on. Westminster has approximately 1,800 rough sleepers on the streets each year. It is a serious problem, which is why it needs more resources.

The Lord Bishop of Chelmsford: My Lords, does the Minister accept that on the frontline of work with rough sleepers and those experiencing homelessness are a lot of small voluntary organisations run and staffed by volunteers? Does she accept that many of these are reporting to people like me a growing problem in the present climate? What resources and help can they turn to at this time of growing difficulty in this field?

Baroness Andrews: My Lords, the small voluntary organisations are critical in identifying people on the streets. They do most of the outreach work and most of the counting for us. As I said, we have put more funding into advice services. In addition, our third-sector strategy is about enabling voluntary organisations and local authorities to commission the right services for the right length of time so that we can get proper delivery and use the third sector in the most effective way possible.

The Countess of Mar: My Lords, do Her Majesty's Government know how many rough sleepers are mentally ill or suffering from learning difficulties? What special provisions are made for them?

Baroness Andrews: My Lords, there is no doubt that many of the people who do not access formal health and welfare services have mental health difficulties and by definition find themselves on the streets. Our cross-cutting strategy, PSA 16, also focuses help with accommodation precisely on those with mental health problems. One of the problems is that we do not have a database or sufficient evidence to know how many people are in that group, but we are engaged in that task.

Financial Services Authority
	 — 
	Question

Lord Renton of Mount Harry: To ask Her Majesty's Government what future role they envisage for the Financial Services Authority.

Lord Davies of Oldham: My Lords, we envisage the Financial Services Authority continuing to be at the heart of regulation of financial services, including being a part of the tripartite system.

Lord Renton of Mount Harry: My Lords, I listened carefully to what the Minister has said, but—there always is a "but" in these matters—with the collapse of the Dunfermline Building Society and with the urgent need now for financial stability, is it not just the right moment to reconsider the relative roles of the Financial Services Authority and the Bank of England regarding the supervision of banks, building societies and the City generally? Does the Minister agree that, ultimately, there can be only one supervisor with the necessary full authority? At the moment, the danger is that either both the FSA and the Bank of England will do the job or neither.

Lord Davies of Oldham: My Lords, the noble Lord has also to consider the history. When the previous regime obtained before 1997, there were bank failures then as well. The lifting of the eyebrows of the Governor of the Bank of England did not save Barings Bank or BCCI. We should be careful about suggesting that this is all a matter of the nature of the regulatory system rather than the difficulties of regulation. Of course, lessons have been learnt by the Financial Services Authority, which is why the chief executive and chairman have been concerned to identify and enhance a significant role in supervision. As the noble Lord has identified, the Dunfermline issue adds to the importance of the crucial role of the FSA in getting things right.

Lord Lea of Crondall: My Lords, does my noble friend agree that any question about the future role of the FSA must have some regard to the excellent first report of our colleague, the noble Lord, Lord Turner? He obviously needs time to bring some of these reforms to fruition. But, in due course, would it not be useful for this House to have a proper debate on the Turner report so that people who have any other critique can bring it to bear? Otherwise, is it not timely for us to give full support to the job that he is doing?

Lord Davies of Oldham: My Lords, I am sure that such a debate would be helpful if it could be arranged through the usual channels. There is no doubt that the FSA is destined to play a critical role in the supervision of the financial system. The financial collapse of the past year has occurred in countries with a whole range of regulatory regimes, some close to ours and some very different, and yet banks and financial institutions have fallen all over the world during this desperate financial situation.

Lord Howe of Aberavon: My Lords, does the noble Lord recall the purpose-built Building Societies Commission established in 1986? Does he further recall—this is a non-partisan question—that the Building Societies Commission was merged with the Financial Services Authority in 1997? The purpose-built commission was required by law,
	"to promote the protection by each building society of the investments of its shareholders and depositors",
	and,
	"to promote the financial stability of building societies generally".
	That supervision was to be based on,
	"close and continuing contact with individual societies",
	and,
	"day-to-day supervision".
	Is it not clear that the standards prescribed statutorily have been increasingly disregarded as a result of the changes made in 1997? Does that not underline the unwisdom of aggregating in giant authorities the functions and purposes of purpose-built organisations? I refer, for example, to the health industry and mergers among the equality bodies. Throwing purposeful bodies together into giant organisations does not promote better supervision.

Lord Davies of Oldham: My Lords, I have listened with care to the points made by the noble and learned Lord, but he will know that the regulatory system in the United States has had to deal with Freddie Mac and Fannie Mae, equivalent building societies that are vastly larger than ours. The House will recognise that the United States Government were obliged to instigate the biggest bail-out in world history in order to support those institutions. We should not be too parochial about this matter. The Chancellor has asked for a report from the FSA on Dunfermline, which will be produced shortly. I have not slightest doubt that lessons will be drawn on the necessary regulation of building societies in circumstances where, up to now, we had been able to take some solace in the fact that while some building societies which had converted into banks had got into desperate trouble, the societies themselves had been relatively unscathed until Dunfermline.

Lord Newby: My Lords, the Minister referred to the report that the Chancellor has commissioned on Dunfermline. Is he aware that the Chancellor said yesterday in the other place that the FSA had been in "constant touch" with the building society since last November? Will he ask the Chancellor to tell the FSA that it needs to be in constant touch with all building societies that have been giving reckless loans over a long period? It should not wait until things reach a crisis point.

Lord Davies of Oldham: My Lords, I understand the point made by the noble Lord, but when the Financial Services Authority acts adroitly and effectively we hear no more about its actions; we hear only about the calamities. The noble Lord will appreciate that the regulatory agencies, for which the Government are responsible, must take their share of responsibility for the issues behind the collapse of a building society like Dunfermline. However, it is the management which took, even quite late in the day, the foolish, absurd and extended positions. At that point it is very doubtful whether a regulatory authority could have saved the situation and prevented Dunfermline getting into difficulties. I must not be premature: a report is due shortly, and all the facts will be available to Members of the House.

Lord Borrie: My Lords—

Lord Hunt of Kings Heath: My Lords, we are now in the 24th minute.

EU: Czech Presidency
	 — 
	Question

Lord Dykes: To ask Her Majesty's Government what assessment they have made of the effect of the resignation of the Government of the Czech Republic on decision-making in the European Union under the Czech Presidency.

Lord Davies of Oldham: My Lords, the Government of the Czech Republic continue as a "Government in Resignation", and Ministers and officials will continue to carry out their duties in full as EU presidency.

Lord Dykes: My Lords, allowing for the occasional vagaries of President Klaus, does the Minister agree with the comment on page 11 of today's Financial Times that this is a problem more in Prague than in Brussels because of the inherent continuity in the troika system and the maintenance of the agendas running continuously over the presidency period?

Lord Davies of Oldham: My Lords, as I have indicated, the president intends to carry on his role in regard to the EU presidency. The reason I swallowed hard over "Government in Resignation" is that I was upbraided on Thursday for the euphemistic terms used at this Dispatch Box from time to time. I want to reassure the House that that was not my phrase.

Lord Anderson of Swansea: My Lords, does my noble friend agree that the current problems were foreseeable and foreseen because of the fragile nature of the Topolánek Government and the idiosyncratic policies of President Klaus? Are not the current difficulties a very powerful argument for implementing the Lisbon treaty as speedily as possible?

Lord Davies of Oldham: My Lords, my noble friend makes a very good and very informed point. With a rotating presidency, which will continue, there will from time to time be internal vicissitudes in states which cause difficulties for the President of the European Union. However, we have every assurance that the Czech President will play his full role until 30 June.

Lord Lawson of Blaby: My Lords, will the noble Lord not reflect on his commendation of what his noble friend said a moment ago in his attack on President Klaus? He is the president of a friendly country, a fellow member of the European Union and a man of very considerable distinction who remains unaffected by the resignation of the Czech Government.

Lord Davies of Oldham: That is so, my Lords, but there is an understandable reluctance at this Dispatch Box to comment on the internal affairs of another country.

Lord Pearson of Rannoch: My Lords, are the Government aware that decision- and law-making in the European Union have increased by 25 per cent since the French and Dutch people rejected its proposed constitution? Are they further aware that neither the absence of the Lisbon treaty nor the resignation of the Czech Government will make the slightest difference to the progress of the juggernaut in Brussels, which will just go on abusing clauses in the existing treaties to achieve its aims, as it has been doing for the past few years?

Lord Davies of Oldham: My Lords, the House is accustomed to the noble Lord's trenchant criticism of the European Union, but the Question concerns the specific issue of anxiety that the internal developments in the Czech Republic might impact adversely upon Europe. I am sure the noble Lord would not want such vicissitudes of that country to affect Europe adversely.

Lord Howell of Guildford: My Lords, as the Government are so anxious to push forward the Lisbon treaty, will the noble Lord at least ensure that his ministerial colleagues in the Foreign and Commonwealth Office have read it thoroughly? When will it be understood that, while the government elites of Europe obviously like the treaty very much, it is not at all popular with the people—not with the Czechs or the Irish, probably not with the French and certainly not in this country? Would it not be valuable to ensure that at least Ministers here have read every detail of it before we push forward with something that most of Europe really does not like?

Lord Davies of Oldham: My Lords, I thought it was leading members of the Conservative Party who did not read documents thoroughly, not this side. I can certainly offer the noble Lord the assurance he seeks. With regard to the unpopularity of the treaty, he will know how many European states have signed up. He may be a little early in suggesting exactly where the Irish people stand on the matter; after all, they are going to vote in October, and I prefer to wait until then.

Lord Lea of Crondall: My Lords, would it not be more relevant to observe that the Lisbon treaty, when ratified, would provide for some permanence between the current six-monthly presidencies so that negotiations could carry on without some of the difficulties that, with crocodile tears, some noble Lords opposite are claiming exist with the present arrangements, while at the same time taking a sideswipe at the treaty?

Lord Davies of Oldham: My Lords, my noble friend is right: the objective of the Lisbon treaty is to come to terms with the enlarged European Community, of which the issue of the rotating presidency is a factor. A proposal under the Lisbon treaty is to strengthen the institutions to render that problem less significant than it otherwise would be.

Constitutional Renewal Bill [HL]
	 — 
	First Reading

A Bill to repeal Sections 132 to 138 of the Serious Organised Crime and Police Act 2005, to make provision relating to the Attorney-General, to make provision relating to the ratification of treaties and to participation in armed conflict by the United Kingdom, to make provision relating to the Civil Service, to make provision relating to parliamentary general elections, to make provision relating to the conduct of Members of Parliament and for connected purposes.
	The Bill was introduced by Lord Tyler, read a first time and ordered to be printed.

Postal Services Bill [HL]

Bill Main Page
	Copy of the Bill
	Explanatory Notes
	Amendments

Committee (2nd Day)

Amendment 20
	 Moved by Lord De Mauley
	20: After Clause 9, insert the following new Clause—
	"Reporting provisions
	Report on partnership deal: timetable and process
	(1) The Secretary of State shall, within one month of this Act being passed, lay before Parliament the expected timetable and procedure of the tendering process to establish a partnership between a Royal Mail company and a private sector operator.
	(2) If, at any date between the laying before Parliament of the report and the conclusion of a partnership deal, the Secretary of State believes that any of the details within the report are likely to be significantly different in practice, he shall inform Parliament of the changes."

Lord De Mauley: Our amendments in this group seek to ensure something that people from every point on the political spectrum agree is missing from these discussions: a clear idea of what sort of partnership we are dealing with. The Bill does not give any indication at all but merely opens up a number of possibilities. The Government's policy paper is not much better; indeed, paragraph 4.6 specifically mentions several of the possible sorts of partnership that might be established. It lists swapping equity, merging businesses or taking on direct equity interests all as possible avenues to be kept open.
	We do not necessarily disagree with there being flexibility at this stage. The Government have taken great pains to reassure stakeholders that there is, as yet, no deal. It is no doubt reassuring that the Government have not yet committed us to a slap-dash deal that does not provide value for the taxpayer or improvement in Royal Mail, but there is no guarantee that this comfortable position will last.
	Amendment 20 seeks to establish just how the Government are managing the tendering process. The Government have spoken of this summer being the expected date of any deal, so I presume that they have at least got that far with their policy. I cannot imagine that any possible commercial confidentiality would be breached by reporting to Parliament on how far along the negotiations were or whether there had been any significant delay to the timetable. With so much hanging on the establishment of a deal, both Parliament and the public should be given fair warning, not only about when the reorganisation will take place but also when the pension fund liabilities will be taken over and when Ofcom are to get fully involved.
	Amendment 21 goes a little further. It would ensure independent scrutiny of any deal to ensure value for money as well as effectiveness. The criteria set out in subsection (2) of the proposed new clause are taken from the Government's policy paper, in which are set out the criteria against which a potential partner's suitability is expected to be assessed. Those criteria are all very well, but their inclusion in a policy document does not ensure that they will be met. Recent history has not given us great confidence that the Government are always successful at negotiating the best possible deal. I cannot think of anything more damaging to Royal Mail than a botched agreement that fails to achieve the objectives laid out in the amendment. There have always been worrying news stories about the ethics of one company that has been rumoured to be interested in being involved in Royal Mail.
	The assessment of a deal in these terms will go deep into commercially confidential matters, so the amendment would not require anything to be made public until after the deal was concluded and even then would allow the removal of commercially sensitive information. However, it would ensure independent assessment of the deal and some parliamentary scrutiny after the fact.
	I hope that the Secretary of State will have no difficulty in accepting the third amendment in the group, Amendment 22. The Government have accepted at paragraph 4.18 of their policy paper parliamentary scrutiny of the amount and distribution of any money received for a minority stake. Despite the promise in that paper, I could find no such requirement anywhere in the Bill.
	I hope that the Secretary of State will accept the amendments. They are the bare minimum that we can expect in terms of the transparency of the deal. I beg to move.

Lord Clarke of Hampstead: I start as I did last week by declaring an interest as a former postman, a former union official, and as having a great love for the British Post Office. I wish that I had thought of the amendments. I did think of one or two, which will appear later on, but the positive feature of Amendment 20 is that it assumes that the legislation must be carried before any agreement is secured with a private partner.
	This is very important. As well as deciding whether to endorse privatisation, Parliament should be entitled to see what such a deal means. Parliament is surely entitled to a clear view of what a suitable partner may be. Can the Secretary of State explain what discussions are under way with potential partners? My own inquiries and those of union officials—as I used to be—in the Communication Workers Union show that the likely suitors for this bonanza are TNT and CVC. Is the Minister aware of any other companies expressing an active interest? Would he care to explain the criteria that the Government believe are relevant in judging the partner as suitable? The Hooper report suggests that it would probably be another postal operator, or at least a firm with experience of network transformation. Do the Government regard those criteria as essential?
	The Secretary of State previously suggested that the Hooper recommendations must be taken in total, which was an unusual response from the Government, given that the Statement was made the same day on which the report was published and they can hardly have had much time to consider the recommendations. That being the case, I draw the Secretary of State's attention to a series of press reports, all appertaining to TNT, one of the potential partners to come up in government statements. On Sunday 8 March, the Sunday Telegraph carried a story concerning illegal acts undertaken by TNT. Those acts involved the falsification and backdating of documents and were of an extensive character. The company was forced to pay back £48 million to the Inland Revenue; that money involved unpaid tax, penalties and interest. Apparently, TNT also had to carry out a similar inquiry into its tax affairs in other EU countries, including Germany, Belgium and Holland, although the company will not say whether these investigations have resulted in further payments or disciplinary action. That remains a void area. The current chief executive of TNT, Mr Peter Bakker, was in post at the company at the time when those illegal acts were undertaken. Does the Secretary of State regard such actions as examples of the expertise that the Government want to introduce into the Royal Mail?
	Amendment 21 has its own value; it says that any deal involving the Royal Mail would not simply be agreed behind closed doors and that there must be some element of parliamentary scrutiny. The amendment suggests that there would be an independent report, which the Secretary of State would lay before Parliament. Of course, there would be problems with such a report in so far as not all the information would be made available due to commercial confidentiality. It is a strange fact that, since 2001, our understanding of what goes on in the Royal Mail is less complete now than at the time of the passing of the Postal Services Act 2000—sad but true. Commercial confidentiality has been used to hide away information that was previously available in every year that Post Office annual reports were published, up until that time. You could look at such an annual report and get the information that you wanted. Today the Royal Mail's annual reports shed less light on the economics of the company than we obtained 10 years ago.
	Be that as it may, I wish to draw attention to proposed subsection (2)(d) in Amendment 21, which refers to,
	"the capacity of the private sector operator to manage stakeholder issues successfully, including relations with trade unions".
	I am confident that the Secretary of State is already aware of the concern expressed in the Hooper report about industrial relations. The report made it clear that the existing industrial relations in the Royal Mail were poor—and I could go on a long while explaining why they are so poor, but I shall not do so today. The report suggests, too, that one of the criteria on which a new partnership would be measured is the ability to transform industrial relations positively. I am sure that the Secretary of State will agree that management needs to be able to carry the workforce with it through major changes; they need to work together. That can be done only if the rationale of the change is made clear to the workforce. If the workforce achieves some benefit from the change, it has to be able to see it. After all, without the co-operation of the workforce, there can be no future for the company, in my view.
	I believe that the Minister will agree with my general comments on industrial relations so far, but will he comment on the current problem that TNT—this possible suitor or predator, as one of my noble friends called it in our debates last week—faces with its workforce in Holland? There was a report on this issue in the Guardian on 10 March, from which we learnt that TNT wanted to cut the wages of workers by 5 per cent. Since that time, I can confirm that further information shows that TNT aims to cut the wages of postal workers in the Netherlands by between 5 per cent and 15 per cent depending on status. Does the Minister believe that it is acceptable for a profitable firm to cut the living standard of its workforce in that manner? Does the Minister believe that cutting wages is a necessary part of transforming industrial relations in Royal Mail? After all, we are entitled to ask whether this is the expertise that is lacking in Royal Mail. Is this what the Government are looking for—a company with such a record? Certainly, we cannot say that TNT would bring to Royal Mail better skills at raising profits. After all, a comparison of the final-quarter results in 2008 showed that Royal Mail's profits are standing up to the recession better than those of TNT.
	Nor can we say that TNT would bring an extra element of mail security to Royal Mail. After all, TNT famously lost the data on disks entrusted to it by the Department for Work and Pensions. It must be something unique about TNT's approach to industrial relations that makes it attractive to the Government. Surely not; after all, the Government are committed in their manifesto and the Warwick 2 agreement to securing "rewarding employment" for postal workers. Does the Minister agree that cutting wages by 5 per cent to 15 per cent is not the route for securing rewarding employment in Royal Mail?
	Amendment 22 also has value. It allows Parliament to examine the intentions of the Government on the disposal of any money paid to the,
	"Treasury, the Secretary of State or any nominee of either of them".
	That is important as we have heard so much loose talk about what the strategic partner is supposed to bring to the assistance of Royal Mail in the way of finance. I very much doubt whether the aim of any strategic partner is to assist the finances of Royal Mail. Certainly, that would not seem to be the case with TNT.
	On 9 March, a number of newspapers including the Guardian covered a story about the conflict between TNT and Royal Mail. In that story, the Royal Mail's chief executive, Adam Crozier, accused TNT of trying to poach customers from Royal Mail's profitable European parcel subsidiary, General Logistics Systems. Some Members of the Committee who were present last week will recall the exchange that we had about GLS. I know that the Government are aware of the problem. The papers reported that Adam Crozier had sent an e-mail to the Government about it. Will the Minister confirm that the Government have read the correspondence with Royal Mail's chief executive officer? If so, will the Minister explain what the response was?
	Perhaps, too, the Minister can now understand why my noble friend Lord Hoyle and I raised questions of the noble Lord, Lord Tunnicliffe, in last week's Committee. After all, it appeared that TNT has been trying to get its hands on GLS outside of the process that we have been discussing on privatisation. Indeed, the Royal Mail's chief executive officer claimed that TNT has been trying to damage the Royal Mail's current business. Does the Minister believe that damaging the business of Royal Mail is a sign of a suitable potential partner for Royal Mail? Does the Minister believe that TNT's interest in Royal Mail will result in its further fragmentation? After all, if TNT wants to siphon GLS off now, would it not be likely that TNT would want to strip down other Royal Mail operations? I look forward to the reply from the Secretary of State.

Lord Hoyle: I will not address what my noble friend Lord Clarke has just said because I agree with every point he made; many of them went over points I made last week. I want to look at Amendment 22 because it raises other issues that I hope my noble friend will reply to when he gets up. It talks about the report on the partnership deal and the disposal of revenue. One of the things that have not been quantified is the amount of investment that Royal Mail will need. The Hooper report talks about hundreds of millions of pounds. My noble friend the Secretary of State has talked about the need for hundreds of millions of pounds, but could that be quantified a little more? Does it mean £400 million or £500 million? Whatever does it mean?
	The amendment talks about the disposal of any money paid to the Treasury or any nominee. I am suspicious about what might happen to any money that comes from a private partnership. Will all of it go to Royal Mail? Will it go into investment and the modernisation of Royal Mail, or will part of it be swallowed by the Treasury? I am rather suspicious that the Treasury will want to get its hands on some of the money that is coming back. I would like, first, the required level of investment to be quantified and, secondly, an assurance that all of the money raised will go into the investment and modernisation that, we have been told, is needed. Will part of it go to the Treasury coffers? I await my noble friend's reply on these points.

Lord Christopher: Will my noble friend clear my mind on a specific aspect of the future? The amendments largely deal with the Bill as it is. Assuming that it becomes an Act, what nature of company does my noble friend envisage? Will it be a quoted or limited company? There will be two shareholders: the Crown—the Government—and whoever wins a contract. On the face of it, a strange valuation issue will arise from those shares. Will they be marketed? Could they be sold? What does the Minister see happening?

Lord Blackwell: While I have sympathy with the objectives of my noble friend's amendments, we must be cautious about the appropriate role of Parliament versus the Executive here. There is a point at which the role of Parliament is to define objectives and give the Government permission to take a course of action, but Parliament should then let the Executive get on with it while holding them to account. I have a slight concern that, in some of the things that we are asking to be brought back to Parliament, such as negotiation details and choice of partner—whether they are the best partner to add value or successfully manage stakeholder issues—we might be crossing the line by getting Parliament too involved in executive matters of judgment and discussions. It would potentially be difficult to have commercial information shared in a way that would allow Parliament to participate in that decision properly. I want to ensure that we consider the precedent of what role Parliament should properly play.

Lord Mandelson: This group of amendments would introduce requirements for the Government to provide a number of reports setting out detail on various aspects of the partnership process. I should say at the outset that I entirely recognise and support the need for appropriate transparency on an important transaction; I want to be fully open about that. The noble Lord, Lord De Mauley, observed that we might follow a number of avenues to create a suitable partnership. As he said, he does not agree with the need for flexibility—I thank him for that observation. I will come back and respond more directly to his points.
	In the mean time, I shall respond to a couple of my noble friends' points. To my noble friend Lord Christopher, I say that, after partnership, the Royal Mail will continue to be, as it is now, a limited company. It will not be listed on any stock exchange for all the reasons that we have previously rehearsed in our debate. In response to the points of my noble friend Lord Clarke about a particular postal operator, TNT, and stories associated with that company about tax and employment rights, it would not be appropriate for me to comment on the media—I was going to say "reporting"; that would be too rich a word for the quality of stories that we have seen. I do not represent in this House those or any other commercial interests; I represent the Government. Therefore, I will not comment further on particular companies. However, TNT has publicly declared its interest, but we are undertaking a fair competition to identify a suitable partner for Royal Mail. It would be invidious for me to comment on one as opposed to another at this stage. The process of looking for a partner is not only about the price being offered by a potential partner. We are not just going to sell to the highest bidder, but I shall come back to that when I talk about the criteria.
	My noble friend also suggested that the board of Royal Mail is at loggerheads with TNT. The Royal Mail board is very supportive of this legislation. It wants a partner holding a minority stake to come in to help transform the company. The Royal Mail board is also supportive of the other proposals on pensions and regulation as a package. Any debate about GLS at this stage is simply a distraction.
	Amendment 20 seeks a report about the timetable and process after Royal Assent. In fact, the process to find a partner is already under way in parallel with the passage of the Bill prior to Royal Assent. The Government hope to have reached agreement with a suitable partner before the summer. The Government's timetable is driven by the need to introduce a partner into the business quickly, so that that partner can bring its transformation experience, expertise and confidence into Royal Mail Group with the minimum of delay. Negotiations are challenging and we must get the best terms for the company and for taxpayers. That is why we will not do a deal on any terms but will negotiate them, and also why we need to avoid a fixed timetable that would give an advantage to the bidder. I do not want to be boxed in, which would benefit only the potential partner with whom the Government are carrying out the negotiation.
	Nevertheless, I shall explain the timetable we are following in broad terms. Since January we have actively sought expressions of interest from potential partners with experience of transforming a postal or network business. On 26 February, we set out in our policy document the main criteria against which we will judge a potential partner's suitability. It might help noble Lords if I rehearse those criteria, which are highlighted in Amendment 21: the price offered for a minority stake or partnership, and the ability of a partner to finance the investment; the ability of the partner to add value to Royal Mail as a whole, including by assisting in the transformation of Royal Mail's letters business and the modernisation of its network; and the partner's capacity to manage stakeholder issues successfully, including relations with the workforce and trade unions. I regard this as indispensable and I agree with my noble friend Lord Clarke on this point.
	In March, we invited shortlisted companies to present a detailed bid on the basis of the published criteria. The process will be phased, with firm offers sought by early June, and with a view to negotiating an initial agreement on the partnership by the summer, as I have said. As I also said at Second Reading, we will ensure that the House is informed of any important developments on the commercial negotiations as discussions continue and as the Bill goes through all its stages. Having given this undertaking, I will fulfil it. The current intention is then to complete the partnership either later this year or early in 2010. If there is any significant delay to this timetable, I will come back to the House to explain the position and the reasons for the delay and to allow noble Lords the opportunity to question me.
	Amendment 21 requires the Government, before any deal is concluded, to commission an independent report on the extent to which the partnership proposed meets the criteria that I have outlined and to lay this before Parliament as soon as possible after the deal is concluded, together with any government response. I do not believe that the amendment is necessary, given the robust process, the independent advice and the subsequent scrutiny which are already attached to transactions of this nature. It will be of interest to noble Lords for me to set out exactly what robust process accompanies transactions of this nature.
	The process sets out the criteria against which all bids will be judged. At all times, the bids will be assessed with the criteria in mind by my department's shareholder executive, a body with a wide variety of commercial and Civil Service expertise and with a track record in securing value for money for the taxpayer in transactions of this kind. The assessment will be undertaken with the close involvement and independent advice of fully qualified external legal, commercial and accounting experts; it is not a cheap process. In addition, the Royal Mail board has its own external legal, commercial and accountancy advisers and will want to satisfy itself that the partnership deal is in the interests of the company.
	I have no doubt that this process, once completed, will be thoroughly examined by the National Audit Office and that it will publish a report on the transaction. It is the usual practice in deals of this nature for the NAO to employ its own independent advisers to scrutinise the transaction; there is a lot of work available. The NAO is the correct authority to provide an independent account reporting directly to Parliament. This is the normal process of reaching and subsequently reviewing a partnership deal in the interests of Royal Mail and the taxpayer. I hope, therefore, that noble Lords will agree that appointing yet another—a fourth—set of independent experts is really unnecessary before a deal is completed. It would delay the process at a time when it is important to secure the future of Royal Mail. It would also have a significant impact on the ability of a deal to go forward as, frankly, it would be unlikely that a private sector partner would agree to such a time-consuming and expensive additional stage in the process.
	I understand that noble Lords opposite are interested to have more detail on the future relationship between the Government and a partner. Clearly, this is subject to negotiation. It might be helpful if I provided more detail on our current expectations in relation to the shareholders' agreement. This will be a legally binding contract between the Government as seller through Royal Mail Holdings and the buyer. That document will make clear what the buyer can do, for example, on a board of appointments and what it cannot do, for example, by placing restrictions on the sale of its shares. The shareholder agreement will reflect that this is a partnership. The Government will have greater control rights than the partner, as is appropriate for the majority shareholder.
	However, the Government are keen to ensure that, in certain areas, there will be shared responsibility with the partner. This will give the partner sufficient rights to enable it to influence the decision-making process in the company. There is no point in having such a partner without their having the influence needed to play a strong, positive role in transforming the business: that is exactly what we are looking to a partner to help us to do. For example, we expect to agree equal rights with the partner in adopting the company's business plan. In order to deliver the required transformation of the business, it will be essential that, in particular, on operational matters, including modernisation of working methods, introduction of technology and product innovation, the partner has a meaningful say in the running of the business.
	The shareholder agreement would also set out the structure of the board for Royal Mail Group. The structure will reflect that this is a partnership in which the Government will retain ultimate control. Our current expectation is that the Government will appoint the chairman and the majority of the non-executive directors. The partner would be able to appoint a minority of non-executive directors. The Government and the partner will have shared responsibility over the appointment of the chief executive.
	While negotiations with potential partners are ongoing, it would be damaging, both to value for money and to the achievability of a deal, to publish a running commentary on the proposed agreements. The details of such transactions are properly a confidential matter between the parties concerned during the course of the negotiation. It would be commercially unprecedented for the related documentation to be published. I am sure that noble Lords will agree that the appropriate place for commercial negotiations to take place is not on the Floor of the House. However, I entirely recognise the legitimate interest of noble Lords in this deal. You will wish to be assured, and rightly so, that the Government are meeting the objectives set for the transaction. Clearly, therefore, we will need to report to both Houses on the deal. Having listened carefully to all noble Lords' comments, I would like to consider further what, if any, amendments to the Bill are required to meet their concerns. I am prepared to discuss this with noble Lords opposite before Report. I hope that this suggestion is acceptable.
	Amendment 22 would require the Government to lay a report before Parliament, setting out what will happen to the proceeds resulting from the disposal of shares in Royal Mail Group Ltd. I fully appreciate that what happens to the proceeds of any disposal will be of high interest to noble Lords and in the other place. As outlined in our policy document, the Government intend to use the money received from the minority share sale to benefit Royal Mail Group, including Post Office Ltd. Obviously, there is a case for partially offsetting the cost to Government of taking on the pension deficit; and of course, anything that tackles the pension deficit releases Royal Mail revenues to invest in modernisation. However, as I and indeed the Prime Minister have made clear, it will also make available capital for Royal Mail to increase the investment available for modernisation and diversification. We will inform both Houses of the payment for the shares, and how it will be distributed, when the consideration is received.
	Having given that undertaking, I do not believe that it is necessary to include such a provision in the Bill. In the light of the further detail and suggestions that I have provided, and the undertakings that I have made, I ask the noble Lord, Lord De Mauley, to withdraw the amendment.

Lord Clarke of Hampstead: Before the Secretary of State sits down, I would like to ask one question. When it is said that the Royal Mail board supports privatisation, is that a fact, or is it not the case that the Royal Mail board welcomes investment and the removal of the pension deficit yoke from its neck?

Lord Mandelson: The Royal Mail board does not support the privatisation of Royal Mail, which, among other reasons, is why the Government are not proposing to do so.

Lord Hoyle: Could my noble friend quantify a little further what investment would be required? He has talked about hundreds of millions of pounds. Can he put a figure on it?

Lord Mandelson: The investment requirement depends on the extent to which the company is able and willing to modernise and innovate its products. I hope that that will be extensive. However, I cannot correlate, before any negotiation has taken place, the company's needs for investment and what we would be able to attract from a potential partner.

Lord Clarke of Hampstead: I am sorry to come back on this again. Regarding the Secretary of State's last comment, is it not a fact that the modernisation programme envisaged by Royal Mail has a total cost of £2 billion? That has been stated publicly. Is it also not the case that some of the money that the Government have already allocated for Royal Mail in the form of borrowing has not been used? Will the figures be within the parameters of what is already in the public domain, or is there something that we do not know about?

Lord Mandelson: Estimates of what the company requires in cash to modernise will vary from source to source. I would say only two things. Modernisation is not a once-off. Modernisation of a company or business has to be ongoing to meet the changing market needs and demands in which the company is undertaking its business. One of the problems for Royal Mail is not only that it has not modernised in terms of the mechanisation of its business, the introduction of new technology and in its working methods; it has also not innovated sufficiently in terms of new products. As I say, modernisation needs to take place on a continuing basis. My noble friend is right to point out that the Government have previously made sums of money available for investment and modernisation, and it is true that Royal Mail has not been able to take up all the resources available. However, I invite noble Lords to ask themselves why the company and its management have not been able, to the extent that is desirable, to take up and use all those resources for modernisation.

Lord Clarke of Hampstead: I am sorry but the modernisation issue brings into focus the Secretary of State's comments to this House on Second Reading regarding two major machines which, other than assistance for delivery, have been talked about in relation to modernisation. The two machines are an enhanced optical character-recognition machine and what is described as a walk sequencing machine. We were told on Second Reading that they are here in wraps. I have made exhaustive inquiries but no one can tell me where these machines are. Perhaps they are still with the manufacturer, SOLYSTIC. We could get a much better idea of what is required if we knew the cost of one of these machines. Perhaps the Secretary of State can tell us the cost of a walk sequencing machine.

Lord Mandelson: I am a member of the Government, not the management of Royal Mail, and it is not my job or the job of any other Minister to be responsible for the introduction of such machinery or to put a price tag on it. That is what the management of Royal Mail is there to do. As shareholders, however, we would like the management to be able to manage in a way that allows it to progressively introduce this machinery and mechanisation in a way that transforms the business of the Royal Mail and its ability to compete properly in the market.

Lord Hoyle: My noble friend mentioned that the money raised would go back into investment in Royal Mail and I mentioned overheads that the Treasury may have incurred. I was asking what share of the money raised will go to the Treasury and what share will go to Royal Mail. Can he perhaps be more specific on that?

Lord Mandelson: No, because we do not know what the sum of money is that will constitute the proceeds from the sale. Until we know that—or indeed until we have a partner in place from whom to get proceeds—I do not think that it would be a very satisfactory discussion between myself and the Chancellor.

Lord Stoddart of Swindon: We keep hearing about modernisation—new products and what have you. We have been hearing about this for a very long time. The Postal Services Act was supposed to put things very right but, since then, the postal services, far from getting better, have got worse. Never mind about the Royal Mail for the moment; what are the Government's objectives? What exactly do the Government see as the job of the Post Office? What is it supposed to do? Where is it going? Are we going to have a resumption of early-morning postal services, for example? Are we going to have a second post, which we used to have? Are those objectives of the Government, or are they content, probably because of shortages of staff, to have mail in this country delivered to many areas not by 12 noon, which is the new and worse objective, but sometimes by five o'clock in the afternoon? Indeed, I had my post delivered one evening at 6.20 pm.
	So what exactly are the objectives of the Government? I think we want to know about those objectives. After all, the first postal service in this country was introduced by Charles I, I think it was, in 1635, and we have had a publicly owned postal service ever since then. Now, we find that it is going to be part-privatised, but the Government do not tell us how much better it is going to be under the new system. Perhaps they can tell us how the service is going to be improved, and how they will ensure that the workers in the industry are protected and the customers are not overcharged for an inferior service.

Lord Mandelson: With respect, I refer the noble Lord to Part 3 of the Bill, which describes the duty to secure the provision of a universal postal service. To do that, you need a Royal Mail that is efficient, competitive and dependable. It is precisely that objective that motivates the Government in introducing this legislation. When the noble Lord talks about failed attempts in the past to turn round the Royal Mail, he eloquently makes the case for the legislation.

Lord De Mauley: I thank all noble Lords for their contributions in what has been a very helpful debate. I thank in particular the noble Lords, Lord Clarke and Lord Hoyle, for their supportive and incisive comments. The noble Lords, Lord Christopher and Lord Stoddart, asked some interesting and important questions. The comments of my noble friend Lord Blackwell are well taken. Our intention was entirely about reporting to Parliament, not interference in the deal, but I take his point. I am happy, if on deliberation we consider it necessary, to look at the wording again. I thank the Secretary of State for his positive response. I thank him in particular for his report on progress towards a deal so far and also for his comments on independent reporting and the fact that Parliament will have an opportunity to discuss the deal in due course. That was all very helpful. I will read his remarks with care and, while of course reserving our right to return to these matters later, for now I beg leave to withdraw the amendment.
	Amendment 20 withdrawn.
	Amendments 21 and 22 not moved.
	Schedule 2 agreed.
	Amendment 23 had been withdrawn from the Marshalled List.
	Clause 10 : Meaning of "owned in its entirety by the Crown" and "publicly owned"
	Amendments 24 to 26 not moved.
	Clause 10 agreed.
	Clause 11 : Indirect ownership of companies
	Amendment 27 not moved.
	Clause 11 agreed.
	Clause 12 : Ownership of a company
	Amendment 28
	 Moved by Lord De Mauley
	28: Clause 12, page 6 , line 2, leave out "or any other person"

Lord De Mauley: Amendments 28 and 29 simply propose drafting improvements to a part of the Bill that by my reading does not quite make sense. Clause 12 deals with the calculation of the proportion of a company owned by the Crown or any other person. I am assuming that this clause will establish whether or not the requirement that only a minority stake in Royal Mail is to be sold has been met. Subsection (1) sets out four methods of calculating the relevant proportion, of which the smallest is to be used. This more or less makes sense until you realise that different paragraphs will undoubtedly apply when looking at the Crown than when looking at the private partner.
	For example, let us say that a deal is established which gives the private partner 20 per cent of distributable profits but 30 per cent of voting rights, the remainder of both staying with the Crown. Under subsection (1) the Crown would be held to own 70 per cent of the company while the private partner would own 20 per cent. That would clearly be nonsense. The amendment would ensure that the Crown's percentage was, as is currently drafted, the smallest percentage under subsection (1), which the Government seem to agree with, and any other person's would simply be derived from that.
	We are in technical territory and I hope that I have read the clause right. If I am mistaken about its intent, I apologise and hope that the noble Lord will provide us with more detail. I found the Explanatory Notes somewhat unhelpful as they merely quote parts of the clause verbatim rather than adding further explanation. I beg to move.

Lord Tunnicliffe: I have sympathy with the noble Lord, Lord De Mauley, and his reading of the clause. Amendment 28 would significantly reduce the scope of Clause 12 so that it would apply to companies directly owned by the Crown. In this instance, that would be only Royal Mail Holdings plc. The reference to "any other person" in Clause 12 does not refer to a partner or any other third party. In fact, nothing in the clause, or indeed in the Bill, relates to a prospective partner. Part 1 deals solely with the Crown ownership and related controls. Clause 12 sets out how to determine the Crown's ownership of a Post Office or Royal Mail company. It does not and cannot relate to any third party such as a partner. Rather, the wording "any other person" has been included in Clause 12(1) because the Government's shareholding in a company may be indirect. This is the case now in relation to both Royal Mail Group Ltd and Post Office Ltd. The Government's stake in both companies is held through their 100 per cent ownership of Royal Mail Holdings plc.
	When Clause 12 refers to a,
	"proportion of a company owned by the Crown or any other person",
	it means the proportion owned by the Crown or Royal Mail Holdings plc. If the words "any other person" are not included in Clause 12, the ownership provisions set out in it will not apply to Royal Mail Group Ltd or Post Office Ltd, they will apply only to Royal Mail Holdings plc. I do not believe that that can be the effect that the noble Lord seeks to achieve.
	As I understand it, Amendment 29 is intended to introduce a definition of the proportion of a company owned by a third party. In this case, that would be that strategic partner. As I explained earlier, Part 1 focuses purely on Crown ownership of Royal Mail and Post Office companies. Part 1 puts in place protection on the ownership of those companies once the current restrictions in the Postal Services Act are repealed. Those ownership protections ensure that Post Office companies are entirely owned by the Crown and that Royal Mail companies remain publicly owned. We have approached the Bill from the perspective of Crown ownership and believe that we should be consistent on that throughout the Bill. In the light of the further clarification that I have provided, I hope that the noble Lord will see that neither of his amendments are necessary and will not press them.

Lord De Mauley: I thank the Minister for the sympathy that he expressed with the amendments. I also thank him for the clarification that the provision does not apply to the prospective partners' percentage interest. I am not sure that I am much the wiser, but I will go away to give it further thought. In the mean time, I beg leave to withdraw the amendment.
	Amendment 28 withdrawn.
	Amendment 29 not moved.
	Amendment 30
	 Moved by Lord De Mauley
	30: Clause 12, page 6, line 16, leave out "on all or substantially all matters"

Lord De Mauley: This is a fairly small amendment seeking some clarification of Clause 12. I hope that the Minister will be able to explain why certain voting rights are to be ignored when calculating the proportion of ownership. What voting rights may safely be dismissed as not important enough to count? I beg to move.

Lord Tunnicliffe: Clause 12 requires the Crown to own all or the majority of the voting rights in a Post Office company or a Royal Mail company respectively. Voting rights are defined in Clause 12(3) as the rights conferred on members to vote at general meetings of the company on all or substantial matters. That provision is based on the definition of a subsidiary in Section 1159 of the Companies Act 2006. For the purpose of that section, a company must hold a majority of the voting rights in another company to be considered that company's holding company. Voting rights are defined in that section in the same way as they are for Clause 12. Given that that is a standard definition of voting rights used in the Companies Act 2006, it is the most appropriate definition to use for these purposes and I see no purpose in amending it. That would weaken the Crown's control. I know of no voting rights that the provision in any way allows to be excluded, but I will check that with my team and write to the noble Lord if that assurance is not complete. On those grounds, I hope that the noble Lord will withdraw the amendment.

Lord De Mauley: I am grateful to the Minister for his response. Once again, I am happy today to withdraw the amendment, and I beg leave to do so.
	Amendment 30 withdrawn.
	Clause 12 agreed.
	Clause 13 agreed.
	Clause 14: Interpretation of Part 1
	Amendment 31
	 Moved by Lord De Mauley
	31: Clause 14, page 7, leave out lines 3 to 5

Lord De Mauley: Amendments 31 and 32 are probing amendments to ensure that the definition of "post office" is properly matched to the situation on the ground.
	My first amendment, probing the entire definition, is tabled to raise concerns that the definition could be stretched to cover a great number of premises which are not what one would automatically think of as a post office. Many different places provide government services directly to the public. Although we certainly support the idea that government departments should try to pass business through the post office network, they certainly do not use it exclusively—nor, I imagine, will they in future. Surely that definition goes too widely.
	I was also interested in the specification that services are provided directly to the public. Much of the Post Office's work is, as we have already discussed, carried out for the Royal Mail rather than for the public directly. As the Bill raises the possibility of post offices expanding their remit into private postal providers, it is not inconceivable that they might develop more services that are not directly for the public. Does this definition not unduly restrict what post offices can and cannot do in future? The post office network primarily ensures public access to services but, as much as that should—and I am sure will—remain post offices' primary function, it need not be all their work. I beg to move.

Lord Mandelson: Amendments 31 and 32 seek to remove or alter the protections that are provided by the definition of "post office" in Clause 14. Post offices deliver a wide range of services, particularly postal and government services, across the country. They play a vital social and economic role in the communities they serve.
	As I mentioned last week, the Government have no intention of supporting any further programme of post office closures. We are committed to ensuring the continued sustainability of the post office network. That is why we decided to award the substantial new contract for the Post Office card account to the Post Office. It is why just last week the DVLA and the Post Office announced a landmark contract for the Post Office to provide the face-to-face service for the 10-year renewal of driving licences, and why we are providing £1.7 billion for it up to 2011, including £150 million a year specifically to support non-commercial branches. To cement this commitment, government will maintain the Post Office entirely in government ownership—a commitment which I note the noble Lord, Lord Hunt, who spoke for one of the opposition parties, was unable to join the Government in making during last week's debate.
	On the amendments, the words "post office" are relevant in this part of the Bill only for the purpose of defining a Post Office company under Clause 2. A Post Office company must be engaged in the provision of post offices. Under Clause 1, a Post Office company must be owned in its entirety by the Crown, so the significance of the definition is that if a company is not engaged in the provision of post offices, it will not be caught by the ownership protections of Clause 1. The definition in Clause 14 is therefore purposefully drafted to be quite broad, but also to make Parliament certain of its meaning. This ensures that the protections provided by the ownership restrictions in Clauses 1 and 2 apply in all appropriate circumstances. At the same time, we do not want the legislation to be silent, leaving the public and the Post Office uncertain about the scope of these protections.
	Trying to encapsulate the varied and vital role of a post office in legislation is not an easy task. However, its social role encompasses the provision directly to the public of both mail services and government services. The Government's ownership controls should therefore remain in force whenever the company is engaged in providing those services directly to the public via its unrivalled network of approximately 12,000 post offices.
	We would not want the removal of the stipulation that a post office must provide services from premises directly to the public, operating from post offices as noble Lords and I recognise them rather than simply providing an internet or telephone service. This face-to-face contact is the fundamental basis of the critical role that post offices play in the communities that they serve. In the light of what I have said, I ask the noble Lord to withdraw the amendment.

Lord O'Neill of Clackmannan: Does this mean that a privately owned Post Office would have to seek the permission of the Government or one of their agents—Post Office Counters under its new name—before it enters into any agreement with a body other than the Government? For example, if it wanted to enter an agreement with a financial services company, would it have to get the permission of the Government? If so, it would somewhat restrict the ability of the individual small post office, as distinct from the national one, to find new partners when in its retailing financial services role, which already has expanded considerably.

Lord Mandelson: I do not believe that it is our intention to limit post offices any more than is the case at the moment. Were that to be the inadvertent consequence, I would want to examine the legislation more carefully.

Lord De Mauley: I thank the Secretary of State for his response and the noble Lord, Lord O'Neill, for his interesting intervention. I am sure that many Members of the Committee will be grateful for the Secretary of State repeating his assurance that the Government do not intend any further post office closures. I am also grateful for his explanation of definitions, which we will look at again carefully. For the moment, I beg leave to withdraw the amendment.
	Amendment 31 withdrawn.
	Amendments 32 and 33 not moved.
	Clause 14 agreed.
	Clause 15: Introduction
	Amendment 34
	 Moved by Lord Clarke of Hampstead
	34: Clause 15, page 7, line 31, leave out from "person" to end of line 33 and insert "who, immediately before the qualifying time, is entitled or contingently or prospectively entitled to benefits under the RMPP,"

Lord Clarke of Hampstead: I shall speak also to Amendments 36 and 38. I expect all Members of the Committee have read the summary and background to Part 2 in the Explanatory Notes. It explains that this part gives power to the Secretary of State to remove the historic pension liabilities of the Royal Mail pension plan from the Royal Mail and take them into government. In plain and simple terms it proposes that the deficit will become the responsibility of the Government. People like me think that it was always the responsibility of the Government, as the employer in the final stage. No doubt much will be made of what this means and I hope during the passage of this Bill to ask noble Lords to consider a number of points to which reference should be made and placed on the record of the House about the pension deficit. But that perhaps is for another day. I shall also ask a number of questions that require responses from the Secretary of State before we reach final decisions on this part. In my view, it is essential that the problems of the deficit are not laid at the door of the women and men who are members of the present superannuation arrangements; that is, post men and women, and others who work for Royal Mail. It is no fault of theirs that the pension scheme is in the state that it is and the deficit is so high.
	At the same time as proposing that responsibility for the deficit is transferred from the employer to the Government, this part of the proposed legislation seeks to establish a new statutory scheme, which may be used to provide benefits to certain members of the Royal Mail pension plan. It suggests that it transfers rights and removes liabilities from the Royal Mail pension plan. It provides the means for transferring Royal Mail pension plan assets to the Government, to divide the Royal Mail pension plan into sections and to allocate assets and liabilities between those sections. My amendments concern mainly the definitions that deal with issues such as "qualifying members" of the Royal Mail pension plan, qualifying time, qualifying accrued rights and survivors' benefits.
	As regards the qualifying member, Amendment No 34 proposes that from "person" in line 31 to the end of line 33 should be left out and replaced with,
	"who, immediately before the qualifying time, is entitled or contingently or prospectively entitled to benefits under the RMPP".
	There are two issues here. The first is that of picking and choosing. All potential beneficiaries of the Royal Mail pension plan should be covered—I repeat, all of them. That includes beneficiaries who are not members and employees who could join but have not yet done so. As the Bill is drafted, the Secretary of State could include some but exclude others.
	The other issue is that of timing. In Amendment 36 I suggest that the words from "before" to the end of line 35 be left out. The time for the division of assets and liabilities can be retrospective or prospective. If the order is retrospective, members who join the Royal Mail pension plan between the effective date of the order and the date when the order is actually made must be included. If it is prospective, members who transfer out between the date when the order is made, and lump sum death benefits paid between the date that the order takes effect and the date when it is made, should be excluded. It follows that the qualifying time should therefore be defined at the moment when the order dividing the assets of the Royal Mail pension plan is made. Amendment 38 concerns survivors' benefits, and seeks to delete paragraph (c). This is covered in the definition of a qualifying member.
	I conclude these remarks with a question. Can I ask the Secretary of State what advantages for the company or its staff are achieved by deleting these lines? I am sure everyone agrees that these benefits are very precious to people, and I should like an answer to that question. I beg to move.

Baroness Turner of Camden: I should like briefly to support my noble friend in his amendments. They deal with qualifying members, which is a very important point. People need to know clearly whether they are qualifying members. As my noble friend has indicated, we must ensure that all the appropriate people are covered, and they should include beneficiaries who are not members and those employees who could join but have not yet done so. As the Bill is drafted, the Secretary of State could include some but exclude others. My noble friend has also pointed out that timing is important. The qualifying time should be defined as the moment when an order dividing the assets of the RMPP is made. This needs to be set out clearly in the Bill so that people who qualify understand that this is their situation and are able to pursue it accordingly. I support the amendments and hope that the Minister will feel inclined to accept them.

Lord Skelmersdale: I have tabled Amendments 35 and 37 in this group. Not having spoken on the Bill before, I must declare an interest as the director of a mail order firm dispatching some 50,000 items a year—not that I believe that that in itself has anything to do with Part 2, which I like to think of by way of a quid pro quo for the inevitable angst of the Post Office union members. It is, as the noble Lord, Lord Clarke, has said, the part of the Bill which covers the taking over by the Government of the historic deficit in the Royal Mail pension scheme. I will also do my best not to make the Second Reading speech I would have made had I been able to remain to the end of that debate. That said, love and marriage go together like a horse and carriage.
	My two amendments in this group try to probe some of the definitions of the clause a little further. The Government have indicated in several policy papers and press releases that the qualifying time shall be set in reference to 16 December 2008, the day when the Hooper review was published. Unusually, that review was accepted on publication; the Government normally take two or three days at the very least to come to a decision on these matters—not that I am suggesting that the Secretary of State has done anything wrong in that. But 16 December was the day on which the Hooper review was published and therefore the day when it became clear that the historic pension liabilities of the RMPP were to be taken over by the taxpayer. However, nowhere is the vagueness indicated by the words,
	"the time immediately before such date as may be prescribed",
	in Clause 15 explained. We have not a clue—I do not think the Secretary of State has a clue—what that means and what timing he can give to those words.
	The Government's memorandum to the Delegated Powers and Regulatory Reform Committee explains this flexibility as necessary because of the possibility of EU state aid restrictions. I understand that, but I hope the Secretary of State will be able to give more detail about what requirements might have to be met to comply with EU state aid provisions and when these requirements might be known. Indeed, have the Government warned the Commission that they wish to give what might well be described in Brussels as state aid to Post Office Ltd? It seems to me that any state aid objection to the provisions in this part will either be so radical as to completely change the Government's approach, in which case they will be back to square one, or so minor as not to require a change of date, in which case this flexibility will be unnecessary.
	Like the noble Lord, Lord Clarke, and the noble Baroness, Lady Turner, I also would like to know how the Government intend to deal with any changes to pension entitlement that might happen between the intended qualifying date and the date of the actual transfer. If an employee currently accruing rights under the defined benefits scheme is promoted this month, and so increases their final pensionable salary, their pre-December 2008 accrued rights will have been increased by a post-qualifying time event. Subsection (3) suggests that these enhanced rights will not be transferred to the new scheme. So who will pay them, or will they be lost to the deferred pensioner? If the latter, the Government will have an even bigger riot on their hands, not least from noble Lords behind the Secretary of State on his far left.
	I do not want to be seen as a conspiracy theorist but this lack of detail also opens up some worrying possibilities for the future. By having no meaningful definition of what "qualifying member" refers to, the Bill would make it possible for new members to be added to the pension scheme at some point in the future. Is this deliberate flexibility on the Government's part, or are they setting up legislation that would allow them to undertake another bail-out of the RMPP at some point in the future once it has accrued new assets and liabilities, without needing to undergo the rigours of parliamentary scrutiny? If the latter, I, for one, believe that new primary legislation should be required.
	I note also the point made by the noble Baroness, Lady Turner, about those people who have not yet joined the pension scheme but may well do so before this great event comes into being. I, too, would like to know the answer to those particular problems.

Lord Mandelson: My Lords, these amendments go to the heart of the definition in Clause 15 of the liabilities that the Government propose will be transferred from the Royal Mail pension plan to a new scheme. Two parts of the definition are the subject of these amendments: the qualifying members of the plan—in other words, the members of the scheme who will be affected by the Government's proposals—and the qualifying time that is the dividing point between the historic liabilities that it is proposed will be transferred to government and the subsequent liabilities that will remain with the company-backed scheme.
	Before I address the amendments, perhaps I may respond first to my noble friend Lady Turner, who asked one or two questions about qualifying members. She asked whether, if the order is retrospective, members who join the scheme between the date when the order comes into effect and the date of the order will be included. The Government propose that individuals who were members at 16 December 2008 will be covered. This is not affected by the date on which any order is made or the possibility that the order could have retrospective effect. As for employers who have rights to join the scheme but have yet to do so, the changes introduced to the scheme in April 2008 mean that it is no longer open to new members. If members had accrued rights in the scheme by 16 December 2008, those qualifying accrued rights would be transferred to Government. If an employee had a prospective right to join the scheme but was not a member and had no accrued rights at that date, they would not be affected by the measures proposed here.
	The noble Lord, Lord Skelmersdale, asked specifically about the definition of "qualifying time", which is,
	"the time immediately before such date as may be prescribed".
	I think he asked when, if 16 December is the prescribed date, the qualifying time will be. The answer is that if that is the prescribed date, we would expect that the qualifying time would be just before midnight on 15 December. I hope that that is an adequate answer to his question—or an answer, at least.
	Together with the other definitions provided for in this clause and the related government policy statement, the definition of these two terms serves to set an important cut-off point that provides certainty for members on the effect of the Government's proposals and defines and limits the liabilities for which the Government and, ultimately, the taxpayer will take responsibility. Given this importance, the Government cannot support the amendment proposed by the noble Lords, Lord De Mauley and Lord Skelmersdale, the effect of which would be that the taxpayer would be assuming an open-ended commitment to meet the cost not just of historic liabilities but also of liabilities related to current and future service of qualifying members. Not only would that represent poor value for the taxpayer but it would certainly create severe difficulties in obtaining state aid clearance from the European Commission. If the Government were legally obliged to meet the cost of current and future service, it would represent a significant ongoing subsidy to Royal Mail, which would not be attractive to the European Commission.
	With regard to the timescales for state aid clearance, on which I was questioned, there is no fixed timescale for that. We expect that the earliest that clearance would be given would be late 2009, but it is equally possible that it may not be until later in 2010. We have not received any indications from the Commission about its likely view. We have had a number of preliminary meetings with the Commission but, as the formal notification has not yet been submitted, it is too early to expect it to give its view.

Lord Skelmersdale: That is helpful on the question of proceedings in the Commission of the European Union, about which, by definition, the Minister knows considerably more than I do. I am glad to hear that the approaches—to put it mildly—have already started, but, as he just said, these are almost unofficial. When will the definitive approach be made? Will it be after the Bill has gone on to the statute book, or can it be made during that period?

Lord Mandelson: I am not sure precisely when we can approach the Commission formally, but I think that we would, if I can put it this way, ramp up our approaches to and contacts with it, and our exploration of its likely attitude to our formal notification. What route it might take by way of examination of, and response to, our notification, we can start to probe fairly early on, but, at this stage, it would be too early for me to say precisely.

Lord Skelmersdale: The Secretary of State said "could ramp up". Does that mean "will ramp up"?

Lord Mandelson: "May" would be a better word.
	Both the qualifying time and qualifying members will be specified by order, made in accordance with Clause 24. On both definitions, the Government have made their policy intention clear. They intend that the qualifying members include all members of the Royal Mail pension plan as at 16 December 2008, the date of the publication of the Hooper report. It is intended that the qualifying time be immediately before that date; in other words, as I have said, just before midnight on 15 December.
	In setting this date, the Government have had to consider the interests of taxpayers, and the need to secure the universal postal service and protect members of the pension scheme. Our view is that, to achieve this objective, the proposed cut-off point represents the minimum level of liabilities—estimated at £29.5 billion—that can be assumed by the taxpayer, which is also compatible with ensuring that a partner is able to agree commercial terms and ensuring that Royal Mail is not left with a scheme that represents a threat to its financial stability going forward.
	The Government recognise the importance of providing clarity and certainty for members of the plan concerning the new arrangements. This is reflected in their recent policy statement, published at First Reading. However, the transfer of liabilities from Royal Mail to the Government is subject to state aid clearance by the European Commission.
	Since it is unlikely that state aid clearance will be obtained before late 2009 at the earliest, and in the light of the parallel commercial negotiations with potential partners, it would not be appropriate to specify in the Bill either the qualifying time or qualifying members as proposed in the amendments put forward by my noble friend Lord Clarke. Although the Government are confident that it will be possible for state aid approval to be obtained, they cannot pre-judge the Commission's detailed decision or rule out the possibility of modification to the proposals. The use of the order-making power represents the best way forward in these circumstances, because it avoids the possibility of new primary legislation being required before the Government's proposals could be implemented. That possibility would be unwelcome, because it would introduce significant uncertainty for scheme members.
	There are further reasons why Amendment 36 cannot be supported by the Government. Setting a cut-off point at a date that is inherently uncertain, as proposed by the amendment, has several adverse consequences; in particular, clarity on the amount of liabilities to be transferred to the Government, which will be necessary for state aid clearance, would be lost. As it would increase the risks carried by the taxpayer, Amendment 36 would also result in significantly less value for money.
	Clause 15 also defines the concept of "qualifying accrued rights". These are the benefit rights and entitlements of members and their dependants resulting from past service in the RMPP that, it is intended, will be transferred to the new public service scheme created under Clause 16. This means that liabilities relating to those rights will be removed from the plan and will no longer be the responsibility of the plan's trustees. For individuals who, at 16 December 2008, were pensioners or former Royal Mail employees, the effect of this clause, together with Clause 16, is that all of their accrued rights in the pension plan would be transferred to a new public service scheme. Their entitlements will be protected in law, and backed by the Government. For the Royal Mail's current employees, their rights built up in the scheme before 16 December 2008 would be transferred to the new public service scheme as if they had left service on 16 December 2008. The responsibility for future entitlements relating to service accrued after that date, or relating to salary increases after that date, will continue to rest with the pension plan. The Government propose to amend the rules of the plan so that, immediately following the transfer out of liabilities to the new public service scheme, any disparity in benefit entitlement in respect of service prior to April 2008 arising from the link with final salary will be met from the pension plan.
	Given the importance of clarity regarding the qualifying accrued rights, the Government cannot support Amendment 37. Amendment 38 is consequential upon Amendment 34, which I spoke to earlier.
	Having explained the Government's approach to the definitions in Clause 15, and the difficulties with the amendments tabled, I invite the noble Lords, Lord Clarke, Lord De Mauley, and Lord Skelmersdale, to consider the withdrawal of their amendments.

Lord Skelmersdale: I can hardly withdraw an amendment that I have not moved; I have only spoken to it, technically.
	I found the Secretary of State's remarks extremely helpful, but I still do not understand two points. First, I do not know why no specific date can be put in the Bill, and I shall have to read the Minister's words extremely carefully before the next stage. Secondly, I could not agree more that it would be totally undesirable to have a second primary piece of legislation to cover a wobble in relationships on this matter between the EU Commission and Her Majesty's Government. However, that is not necessary. We could cope with the situation, if we wanted, by subordinate legislation, but this Bill would have to be amended to take account of that scenario. It is not beyond the wit of man. I agree with the Secretary of State that it would be a mistake to have to go on to a second Bill in those circumstances, but I am not yet convinced that the game is worth the candle to go down the subordinate legislation route to which I referred. That will be part of my thinking between now and the next stage.

Lord Stoddart of Swindon: Before the noble Lord, Lord Clarke, winds up on his amendment, I have a further question on the role of the European Union in granting permission for the Government to fund the accrued liabilities in the pension fund. I am not at all sure that I understood exactly what the Minister's reply was on that matter, and I shall tell him why.
	In 2007, the European Union allowed the Government to subsidise the postal service by £460 million. The theory is that the subsidy was allowed only on condition that 2,500 post offices were closed down. I do not know whether that was absolutely so, but I would like to know whether the Secretary of State knows whether that happened and whether the £460 million subsidy would have been granted had the Government not agreed to close those post offices.
	I do not know whether we can call it a subsidy, but I understand that the last assessment of the accrued liabilities of the Post Office and Royal Mail was a little more than £5.2 billion, a huge amount of money. If the European Union defines it as a subsidy to the Post Office and the Royal Mail rather than the Government taking over an accrued debt for which they are liable, surely the whole project is in jeopardy. If the European Union says that it is a subsidy and that the Government are merely using a device to get around the EU rules contained in Article 87.1 of the EC Treaty, this Bill cannot go ahead.
	I am sure that the Secretary of State is knowledgeable about these things. After all, he has been a member of the Commission so he will know even better than I that the Commission takes the question of state subsidy to part-private or private firms very seriously. I hope that he will be able to tell us that the Commission is likely, in his experience, to grant its permission for the Government to take these liabilities, which are well over £5 billion at the present valuation.

Lord Mandelson: The simple response, quite honestly, is that, if the European Commission chose not to give state aid clearance, we would not be able to proceed with the measures in this legislation. It is perfectly clear and straightforward. A bailout of a pension fund on this scale is clearly state aid and is quite a tall order. It requires clearance by the European Commission. We will be in a position to obtain that clearance from the Commission if the measures that we are adopting to tackle the pension fund deficit are accompanied by modernisation, reforms and transformation of the business, which the legislation as a whole, including the introduction of a minority strategic partner, aims to achieve.
	If anyone imagines that it would be simple or even possible to go ahead simply with a bailout of the pension fund and nothing else, I am afraid that they are not weighing properly the implications of that for state aid clearance. I do not think that we would get it. Therefore, the idea that we could simply go ahead with the part of the Bill relating to pensions and the changes that we are proposing that affect the regulation and get state aid clearance as a result is fanciful. That is why we have no alternative, even if we wanted one, but to go ahead with the legislation in its entirety and not cherry-pick bits of it.

Lord Skelmersdale: I cannot resist interjecting that I never thought that I would hear the acronym TINA, invented by my noble friend Lady Thatcher, from such a person as the current Secretary of State. "There is no alternative"; of course, the Minister is quite right. As I said at the beginning of my few words on the last group of amendments:
	"Love and marriage, love and marriage".

Lord Clarke of Hampstead: I sincerely thank my noble friend Lady Turner for her nicely worded support for the basic principle of people being able to move in and out of pension schemes, and the definition of where they stand within a scheme.
	I was slightly amused by the reference of the noble Lord, Lord Skelmersdale, to the haste with which the Government were able to concur with the Hooper report, on the day that it was published. How the Government could say "We agree" within hours has certainly been asked in many places—not necessarily the pubs, clubs and magistrates' courts. People like me think that the point made by the noble Lord, Lord Skelmersdale, is valid. The Hooper report was predicated on a number of false assumptions. Some of its calculations and findings do not bear scrutiny. We will obviously return to that.
	The Secretary of State has made a number of comments, and I am delighted that we will be able to crawl over every word that he says, once we see them published, and work out better amendments for the future. If there are things that we can improve upon, I hope that I and other people with an interest in the Bill will do so.
	My friend of many years, the noble Lord, Lord Stoddart, brings in an interesting point about the European Union. I remind the Committee that we would not be in this situation today if it had not been for the Commission's direction to liberalise our post office in the first place. I tried to expose the indecent haste at that time, as my noble friend Lord Sainsbury tried to defend the Government's position. We should bear in mind that that nine or 10 years' loss of revenue, because of the false accounting system of what was Postcomm, has helped to build up the problems that we face now. Just for good measure, we do not know when some of the member states of the European Union are going to start liberalisation. We have had to live with it for all those years because we were told that it was a directive.
	I am looking forward to seeing what can be done. Not being a great fan of the Commission or the European Union as a whole, I would be delighted if they could go into their toolbox, find a gigantic spanner and throw it into the works of the Bill. That would achieve what I tried to do at Second Reading. I said that the Bill was ill-timed, ill-conceived, wrong and against Labour Party policy in principle. I will study carefully what the Secretary of State has said, and will be interested to see what comes out of any real examination of the European Union on this.
	The Secretary of State mentioned the regulator. Members of the Committee will not find me wanting in my attempts to get a fair and balanced regulator. The House has heard me make clear on a number of occasions that the regulator was rigged from the start. Have a good look at the Hooper report, and see what it says about how Postcomm has worked: worked against the interests of the Royal Mail; worked against the interests of the Post Office; and certainly worked against the interests of the Government, who have been denied funds because of how it has operated. I am pleased that the Secretary of State mentioned the regulator. We will talk about it later, and I, for one, will be the first in the queue to discuss with Ofcom how we can find a system that will assist the consumer—members of the public, who want a better service—in getting a better service. We will come to that in later amendments. I will be there, with Ofcom, if it will have me, to talk about how we can get the best deal for the public, the Post Office and the people who work in the industry. For now, however, I beg leave to withdraw the amendment.
	Amendment 34 withdrawn.
	Amendments 35 to 38 not moved.
	Amendment 39
	 Moved by Lord Clarke of Hampstead
	39: Clause 15, page 8, line 5, at end insert "other than additional voluntary contributions paid to acquire money purchase benefits (as defined in section 181 of the Pension Schemes Act 1993 (c. 48))"

Lord Clarke of Hampstead: Amendment 39 to Clause 15 deals with additional voluntary contributions, commonly described as AVCs. The only purpose of AVCs is to help people have a better retirement. They are provided either through the pension scheme itself or by insurance companies. My Amendment 39 seeks to add to Clause 15(2)(b) the words,
	"other than additional voluntary contributions paid to acquire money purchase benefits (as defined in section 181 of the Pension Schemes Act 1993 (c. 48))".
	Additional voluntary contributions under the Royal Mail pension plan can be used to pay for additional periods of service or to buy additional pension on a money purchase basis. The Bill does not differentiate between them. Money purchase AVCs are linked to service and carry a surplus or deficit. The cost of buying an additional period is linked to a member's age. Once a member agrees to buy the added years, the price is fixed. If a member of the scheme has already entered into an additional voluntary contribution contract, he or she should be permitted to continue with it. The years already purchased will be qualifying accrued rights, and so the right to continue with the contract should pass to the new public scheme, or the public scheme section of a segregated Royal Mail pension plan as it is envisaged that it will be segregated.
	As I say, AVCs are a very valuable part of any pension scheme. It would be useful if more attention was paid to this method of enhancing occupational pensions. I hope that the Secretary of State will recognise the value and benefits of this amendment. It is straightforward, quite simple and makes clear that years already paid for by the member will be set out as qualifying accrued rights. Added years, a contract between the member and the pension plan, and money purchase schemes should stay with Royal Mail pension plan.
	The right to transfer these accrued rights is important. I hope that the Secretary of State will agree that this amendment is supportive and helpful to people in the industry. I beg to move.

Lord De Mauley: The noble Lord, Lord Clarke, raises some important points. The Royal Mail pension plan contains a variety of pension entitlements. For a start, there is the basic defined payment scheme which closed to new members last April, and the defined contribution scheme which replaced it. I think I understand that the Government intend to take over only the liabilities relating to the defined payment scheme, which is sensible, since the defined contribution scheme is by definition fully funded. However, I should be grateful if the Secretary of State could confirm that.
	However, there are more complications than just the direct contribution scheme. The noble Lord, Lord Clarke, has raised the question of what will happen to additional voluntary contributions. Clarification on these and any other top-up options that exist within the Royal Mail pension plan would be very helpful.
	The Government have indicated their intention, with this Bill, to take over many billions of pounds of liabilities. It would be extremely convenient for their balance sheet if they were able to take over more assets now in exchange for more liabilities in the future. However convenient for the Government stretching the taxpayer's rescue to include all sorts of complications might be, it will be bad news for the taxpayer if anything more than the most pared-down liabilities are taken on. Absorbing fully funded liabilities from the Royal Mail pension plan will not help the pensioners and should not be allowed to happen.

Lord Mandelson: I immediately confirm that the noble Lord, Lord De Mauley, is right that the Government's intention is to take over the defined benefit scheme but not the defined contribution scheme.
	I am grateful to my noble friend for his amendment. It provides a valuable opportunity for me to explain further the Government's proposals in respect of the treatment of additional voluntary contributions, or AVCs.
	At present, the members of the scheme can make additional contributions in order to increase their provision for retirement. They can do this either through the contributions for the purchase of "added years" of reckonable service, which are invested with the pension plan's main assets, or by investing in a range of pooled investment vehicles as part of a "money purchase" arrangement. Around 5,000 employees are currently purchasing added years of service. They represent just over 3 per cent of current active members. The total value of investments under the money purchase arrangements was £84 million as at March 2008. This comprises some 19,300 individual AVC contracts, of which roughly half relate to active members.
	The Government's intention in proposing subsection (2)(b) has been to provide the flexibility to enable the inclusion of rights that have been accrued through additional voluntary contributions, or AVCs, within the qualifying accrued rights to be transferred to the Government. The amendment raises the question as to the comparative treatment of the two categories of benefit to which AVCs can relate. The Government have been discussing this issue with the pension plan trustees, both in regard to the underlying policy position and the implications in terms of administration.
	At this point, the Government are minded to adopt a solution that follows the intention behind this amendment. Where AVCs have been paid prior to the qualifying time for the purchase of added years, it makes sense for the additional service already bought to transfer to the Government with the other qualifying accrued rights. This is because the purchase of added years relates closely to the defined benefit provisions in the main scheme and carries many of the same risks in terms of longevity and investment returns. In contrast, the investments related to the money purchase AVCs do not have these same characteristics and could therefore legitimately remain with the pension plan.
	This approach, and indeed the alternatives, has implications for co-ordination between the administration of the new government-backed scheme and the pension plan. Although the numbers of members involved are small, the Government would like further time to conclude consultation with the trustees on these issues before returning to the question of whether a legislative amendment is required. On this basis, the Government will agree to consider the amendment and return to the issue on Report.

Lord Clarke of Hampstead: I do not know whether I have done something wrong. If the Secretary of State is agreeing with something that I have said, I suppose I ought to be grateful. I will get the words right; I should be grateful, and I am. I hope that we will see the conclusion of the further discussions that are taking place before the Bill goes much further down the road, to the other end of this Building. For now, I am grateful, and I beg leave to withdraw the amendment.
	Amendment 39 withdrawn.
	Amendment 40
	 Moved by Lord Clarke of Hampstead
	40: Clause 15, page 8, line 11, at end insert—
	"(4) The amount of any benefit payable to a qualifying member of the RMPP shall be his relevant pensions provision defined in section 19(3)."

Lord Clarke of Hampstead: Amendment 40 is grouped with a number of other amendments. I shall speak also to Amendments 63, 64, 65, 66, 67 and 68. It might take a while.
	Amendment 40 seeks to amend Clause 15. It proposes the insertion, after the word "service" in line 11 on page 8, of a new subsection (4), which would read:
	"The amount of any benefit payable to a qualifying member of the RMPP shall be his relevant pensions provision defined in section 19(3)".
	Clause 19(3) states:
	"'The relevant pensions provision' means the provision for the payment of pensions or other benefits which is contained in the RMPP or in a new public scheme".
	When I read this part of the Bill for the first time, it looked like a mechanism for splitting a member's rights; that is, splitting past service rights from the salary link and converting them to contingent benefits, such as ill-health, retirement from service and a change from active to deferred status, prior to disposing of the salary link and contingent benefits altogether. Further reading of the clause suggests that this is not the case, and that it could be a mechanism for deciding what assets and liabilities the Secretary of State will take. It could also suggest that the benefits for future service, and the "add-on" salary link and contingent benefit rights, will be carried by the Royal Mail pension plan. The amendment that would create new subsection (4) makes the point that no benefits will be lost. I hope that the Secretary of State will clarify this.
	I turn to some other amendments in the group. Amendment 63 is the first of my amendments to Clause 19. It proposes an additional subsection (1A), to be inserted at line 44 on page 9, which would read:
	"(1A) In exercising the power, the Secretary of State must ensure that—
	"(a) in the case of the power to make an order under section 16, the relevant pensions provision in respect of each qualifying member of the RMPP is the same after the exercise of the power as it is immediately before the exercise of that power, and
	"(b) in the case of the power to make an order under section 17 or 18, the subsisting rights provisions contained in sections 67 to 67I—
	I have got that wrong—
	"of the Pensions Act 1995 ... are complied with".
	"(1B) For the purpose of subsection (1A)—
	"(a) the RMPP shall be deemed not to be a public service pension scheme,
	"(b) references to subsisting rights shall be taken to be references to the relevant pensions provision,
	"(c) references to the trustees shall be taken to include a reference to the Secretary of State".
	It is all very straightforward.
	Amendments 64 and 65 seek to separate Section 16, 17 and 18 orders. Amendment 64 refers to line 1 on page 10 and proposes that subsection (2) be omitted. Amendment 65 refers to line 5 on the same page and proposes that subsection (3) be replaced by:
	"( ) The relevant pensions provision means the provision for the payment of pensions or other benefits immediately before the exercise of the power—
	"(a) as of right,
	"(b) in the event of death,
	"(c) in the event of early retirement on the grounds of ill-health or otherwise,
	"(d) on the happening of a contingency, or
	"(e) on the exercise of a discretion by the trustee of the RMPP, where the payment is made by the trustee of the RMPP or under a new public scheme or both.
	"( ) If the amount of a pension or other benefit is calculated by reference to a person's remuneration at the date of leaving the RMPP (by reason of death, retirement or otherwise), his remuneration for the purpose of establishing relevant pensions provision shall be taken to be his remuneration at the date of leaving the RMPP (by reason of death, retirement or otherwise), and not his remuneration at the date of the exercise of the power to make an order".
	The heading of Clause 19 is "Protection against adverse treatment". As drafted, it covers benefits paid by the Royal Mail pension plan and the new public scheme. The fact that all benefits are currently paid through the Royal Mail pension plan means at the outset that Royal Mail pension plan benefits are protected. The amendment seeks to spell that out by ensuring protection for contingent benefits—for example, benefits payable in the event of death in service, ill health or early retirement; or discretionary benefits—for example, the trustees' right to grant a discretionary benefit that cannot be removed and which refers to the salary link.
	Amendment 66, in the names of the noble Lords, Lord Skelmersdale and Lord De Mauley, and in my name, would delete subsection (4), on line 8 of page 10. The clause permits the Secretary of State to opt out of any form of protection if it would contravene European law. Can he inform the House which European legislation he is referring to? This needs to be clarified. Is he referring to legislation dealing with discrimination? If he is, is he not satisfied that the Royal Mail pension plan is not already compliant? If the trustee of the RMPP is operating lawfully, then that should be sufficient. I do not believe that the Secretary of State needs to have an opt-out that allows him to second-guess the trustee.
	Amendment 67 would delete paragraphs (a) to (c) of subsection (5), which deals with the powers of the Secretary of State. The amendment is quite simple; it links paragraph (d) with the opening words of the subsection, which would read:
	"Nothing in those subsections is to be read as affecting any power of any person to amend the RMPP or a new public scheme".
	This is a consequential amendment. Amendment 68 would delete, at line 20 of page 10, subsections (6) and (7). Subsection (6) states:
	"The power of the Secretary of State to amend a new public scheme may not be exercised in any manner which would or might adversely affect any provision of the scheme made in respect of qualifying accrued rights unless—
	(a) the consent requirements are satisfied in respect of the exercise of the power in that manner, or
	(b) the scheme is amended in the prescribed manner".
	Subsection (7) states:
	"The consent requirements are those prescribed for the purpose of obtaining the consent of members of the scheme to its amendment".
	This is also a consequential amendment. I beg to move.

Lord Skelmersdale: The amendments of the noble Lord, Lord Clarke, propose some interesting alternative drafting for the adverse-effect safeguard in Clause 19. I am not quite sure why many of those safeguards appear in Clause 16; but be that as it may, I have tabled further amendments to Clause 19 on which I intend to raise some questions about the extent of the safeguard and the apparent loopholes that have been drafted into the Bill. For now, I shall concentrate on the amendments of the noble Lord, Lord Clarke. The most substantive change that his amendments suggest is the extension of the safeguard to the RMPP. I would welcome some assurances from the noble Lord, Lord McKenzie, that any transfer or future amendment to the RMPP by the Secretary of State will not be to the detriment of members remaining in that scheme. The noble Lord, Lord Clarke, is absolutely right to table amendments to ensure that no detrimental effect will result from the change from the existing DB scheme to the new scheme proposed in the Bill.
	Amendment 62A would close one of the loopholes that appear to have been drafted into this legislation. In Clause 19 the protection, such as it is, that is extended to members of the RMPP applies only to certain order-making powers under Clause 16. Again, the noble Lord, Lord Clarke, is quite right to question this. Certainly it applies to the chief of the Clause 16 powers, the power to set up a new public scheme and transfer rights to it, but the deliberate exclusion of the other powers in subsections (3) to (7) suggests that they might be applied in a way that would indeed cause detriment to members. Can the Minister explain why the other powers also do not have to meet the test of not causing material detriment to the members? It seems that the two things do not balance out at all. Is it because they absolutely cannot be applied in a way that would be detrimental to pensioners, or is it because the Secretary of State would prefer not to have to meet the test when considering future alterations—my brief uses the extraordinary word "tweaks"—to the new public pensions scheme?
	Amendment 64B attempts to put the safeguard on a more objective footing. The question of whether the safeguard has been met is, I suggest, highly subjective. It depends on many different factors. The valuations used to assess how good the rights are before the exercise of the power will, of course, affect the final judgement, as will the assessment of any risk that has been added to or removed from those rights. The current drafting appears to give the Secretary of State a great deal of leeway to change the figures—even to fudge them—and sign off on any exercise of the relevant powers. I quote from page 10 of the blue-covered pamphlet, published so helpfully by the department, which says "as good as" without any independent scrutiny. How can one judge whether they are "as good as" or "not as good as"?
	I recommend my amendment not only for the additional security that it would offer pension members but also because of the possibility of reducing any future judicial reviews on this matter. It would be extremely damaging for members' confidence in their pensions if there were any uncertainty about whether the safeguard had been met. I hope the Minister will seriously consider bringing some proper scrutiny into this clause.
	There is, of course, a distinct danger of proceeding on overly optimistic figures that do not tell the whole story. We need only to look at the figures for local government pension schemes to see just how much deficit can be hidden away in the footnotes. The official deficit on these schemes is about £23 billion based on a March 2007 valuation. The Minister is by background an accountant and will know that, when the required standards of private sector schemes are applied, FRS 17 creates a totally new deficit, which is shown to be around £43 billion—nearly twice as much. This, of course, is based on figures taken from before the recent economic crisis. The Government appear to be hiding their heads in the sand about the local government scheme deficit, refusing to even contemplate my party's suggestion of a proper review of the situation.
	Amendment 66 seeks to probe how previous enactments or Community obligations might prevent the Secretary of State from fulfilling the requirements in subsection (2). I find it absolutely inconceivable that any responsible Government—and I include all Governments of this country—should knowingly put themselves at risk of an EU court judgment. Of course, we have had a discussion even today on the necessary permissions around state aid, which clearly have not been received—indeed, they have not yet been definitively applied for. Can the Minister therefore confirm that the Government are prepared to press on with this part of the Bill, even if that permission is denied? For example, do they have enough money in the kitty, given the vast amount of money that is being spread around the economy at the moment? Do they consider taking over the liabilities, even if it causes material damage to the members, a possible second option? If not, then why is this loophole in here? When would they consider using it? My Amendment 64A seeks to ensure that the assessment of adverse effect applies not only to the individual members of the RMPP but also to any dependants who have accrued rights—a subject very dear to the heart of the noble Baroness, Lady Turner. It has become very clear to me over the past few years when debating legislation establishing private sector pension protection under the PPF and the FAS that the Government consider these secondary benefits to be of much less value than the direct pension rights that the member accrues. This is very unfair to the families, whether we are talking about the surviving partner or the children of the member, who have as much right to their derived benefits as the member. I hope that the Minister will reassure me that the Bill does not intend to exclude these ancillary benefits as unimportant. If he cannot do that, I hope that he will accept my amendment in one form or another.
	Clause 19(6) seems to establish yet another loophole in the safeguard. As the Explanatory Notes make clear, subsection (6) governs any future changes to the new public scheme and ensures that any detrimental change will be subject to the consent of the members or—this is the more worrying bit—in some prescribed manner, whatever that may mean. What does it mean? As drafted, subsection (6)(b) would allow the Secretary of State to prescribe a simpler procedure by which he could bypass not only the consent of the members but all the safeguards established in the earlier subsections of the clause. Why? When will the Secretary of State use that power?
	If the Secretary of State is minded to reduce the pension rights of members, and they have not given their consent, surely the reduction should not be made. The only application of a similar power is in the Armed Forces (Pensions and Compensation) Act 2004, which has been used either to allow the consent of Parliament to be waived when a member cannot be tracked down or to make adjustments in the application of inflation to benefits. The first example is already covered in existing provisions about what signifies consent, and the second is made redundant by the uprating of benefits remaining completely at the Secretary of State's discretion in Clause 16(3)(a), as we will debate on Amendment 42.
	I realise that this is an enormous group, and I sympathise with the Minister for having to take it on, but the noble Lord, Lord Clarke, and I have asked reasonable questions on this part of the Bill and we would like to hear the Minister's definitive reply.

Lord McKenzie of Luton: This group of amendments is focused on the protection that members of the RMPP are afforded in Part 2 of the Bill. It is an important group, if somewhat extensive. I assure the Committee that member protection is at the core of the Government's proposals. In responding to the points raised it would be helpful if I were to give an overview of Clause 19 and the protection that it provides for scheme members. I shall then go on to address the specific amendments.
	Clause 19 limits the Secretary of State's powers under Part 2 in two ways to protect members of the Royal Mail pension plan from being detrimentally affected by the Government's proposals. The first layer of protection is in subsection (2), which limits the Secretary of State's key powers to establish a new scheme or transfer rights to a new scheme under Clause 16, to divide the RMPP into different sections under Clause 17, or to amend the RMPP under Clause 18. The Secretary of State must ensure that in exercising these key powers he does not negatively affect the pension position of members of the RMPP.
	The test in subsection (2) is designed to ensure that a member's relevant pension provision is no worse immediately after the exercise of the power than immediately before. The relevant pension provision, which is protected, is defined in subsection (3), which includes pensions already in payment to RMPP members and their dependants as well as benefits that will become payable when the member leaves service, retires or dies. It will include benefits payable in the event of a contingency, such as ill health, early retirement or following the exercise of discretion. Because the RMPP is set up under trust, while the new scheme will be a statutory arrangement we expect that it may require some differences in the way that benefits are determined or provided. For example, decisions about the scheme will be taken by the Secretary of State or persons to whom he delegates the scheme administration, rather than by trustees.
	However, we intend that the value of members' accrued benefits will be no different. The Secretary of State cannot exercise his powers to establish a new scheme, transfer benefits to the new scheme or make changes to the RMPP in a way that decreases the value of members' benefits. Let me be clear: the test does not restrict the powers of Royal Mail or the trustees in relation to the ongoing operation of the Royal Mail pension plan.
	The second layer of protection for members is in subsection (6). It limits the Government's ability to amend the new public service scheme, in order to protect the accrued benefits of members transferred across from the RMPP. The new scheme can be amended in a way that would or might adversely affect accrued rights only if prescribed steps are taken to obtain the consent of members, or if the scheme is amended "in the prescribed way". That was the point pressed by the noble Lord, Lord Skelmersdale.
	That provision is intended to protect members in a similar way to the protection that they currently have under Section 67 of the Pensions Act 1995. It is not appropriate to apply Section 67 directly to the new government scheme—that is the import of one of the amendments tabled by my noble friend Lord Clarke—because it is not a trust-based scheme. However, like Section 67, subsection (6) prohibits amendments unless they either meet consent requirements or are of another description prescribed in secondary legislation. As the noble Lord, Lord Skelmersdale, recognised, subsection (6) is based on Section 3(1) of the Armed Forces (Pensions and Compensation Act) 2004, which is intended to provide similar protection to that under Section 67 for members of the Armed Forces pension scheme—a non-trust-based scheme similar in structure to the new government scheme for Royal Mail employees.
	The method for obtaining consent from members of the new government scheme to amendments that might affect their accrued rights will be spelled out in more detail in secondary legislation. However, I can say that our intention is to follow a similar approach to the consent requirements that already apply to changes made to the RMPP, as provided for under Section 67 of the Pensions Act 1995.
	Clause 19(6)(b) reflects the fact that certain prescribed amendments may be made to occupational pension schemes under Sections 67 and 68 of the Pensions Act 1995. It would enable existing prescribed circumstances under those sections to apply to the new scheme. That power may also be needed to ensure that the rules of the new scheme properly reflect members' actual entitlements under the RMPP and that any technical discrepancies can be resolved.
	In future, it may be appropriate as unforeseen circumstances arise to prescribe other exceptions for pension schemes under Sections 67 or 68. If that happens, there may be a need to enable similar changes to be made to the new public service scheme. The new scheme should not be in a fundamentally different position from occupational pension schemes, but instead should be able to make changes that trustees and employers are permitted to make.
	Turning to the detail of the amendments, as I mentioned earlier, the first layer of protection for members, in subsection (2), is designed to ensure that a member's pension provision is no worse immediately after the exercise of the power than it was immediately before. A second layer of protection for members is contained in subsection (6). It limits the Government's ability to amend the new public service scheme, in order to protect the accrued benefits of members transferred across from the RMPP. The Government recognise the importance of protecting members' benefits when the initial transfer to the new scheme takes place. That is why the initial use of government powers under Clause 16 requires the Secretary of State to ensure that relevant pension provision for members of the RMPP is in all material respects at least as good immediately after the transfer as it was immediately before. In other words, the Government cannot exercise the power to transfer qualifying accrued rights to the new scheme in a way that reduces members' pension entitlements.
	Amendment 64B would require an appropriate qualified actuary to certify that the test set out in subsection (2) had been met. In assessing whether that test is met—in other words, the members are in a position at least as good in all material respects—the Secretary of State will take appropriate expert advice, as required, which is likely to include both actuarial advice and legal advice. However, certification from an actuary would not be appropriate because, immediately following the establishment of the new public scheme, the members' total benefits would in all material respects be the same as immediately before the change. Our intention is to write the rules of the new scheme and adjust the rules of the RMPP so that, immediately after the transfer out of liabilities, in aggregate they provide the same benefit to which members are currently entitled from the RMPP. I think that that was the particular assurance that my noble friend Lord Clarke was seeking.

Lord Skelmersdale: I do not know whether the Minister is going to leave that point, but when he says "members" does he also mean members' dependants?

Lord McKenzie of Luton: Yes, indeed. I touched on that point in part, and I will come to it again in due course.
	At the same time as establishing the new public service scheme, we intend to amend the RMPP rules so that the benefits that are provided are reduced by the benefits that will now be payable from the new public scheme. The change for members with benefits in both the new scheme and the RMPP is that total benefits will be provided from two different schemes, and the type and level of benefits that will be payable in different circumstances will not be changed by the exercise of these powers. An actuarial certificate will be appropriate only when comparing two schemes with different terms and benefits, and as there is no intention of making the benefits more generous in some circumstances or less generous in others, certification by an actuary is not necessary or appropriate in this case.
	Once the qualifying accrued rights have been transferred, the new scheme should have the flexibility to make amendments to meet changing circumstances on the same basis as currently applies to the RMPP and to other occupational pension schemes. That is why future amendments to the new scheme are permitted, subject to restrictions to amendments that would or might adversely affect qualifying accrued rights. This is comparable to the protection that members currently have under Section 67 of the Pensions Act 1995. As I mentioned earlier, it is not appropriate to apply Section 67 directly, because the new scheme is not a trust-based scheme. However, like Section 67, subsection (6) prohibits amendments unless they either meet consent requirements or are of another description prescribed in secondary legislation.
	We want the government scheme to be able to reflect unforeseen developments in the future, and the new scheme should not be in a fundamentally different position from that of occupational pension schemes. Instead, it should be able to make changes that trustees and employers are permitted to make. Amendments 62A and 69 would prevent the Government from being able to react to future circumstances, and therefore cannot be accepted. However, I hope that this more detailed explanation of how Clause 19 operates has reassured noble Lords that protecting members is a key objective for the Government in Part 2. That is why I ask noble Lords to consider not pressing their amendments.
	On Amendment 63, I hope that I have assured my noble friend Lord Clarke of the significant protection for members of the RMPP that is already set out in the Bill. The amendment would not give members any additional protection. Furthermore, it could prevent any changes being made to the new public service scheme, even where such changes might be for the benefit of members. As a result, the Government cannot support the amendment.
	On Amendment 64A, the test in Clause 19(2) applies to each person who is or has been a member of the RMPP. It therefore covers current and former members of the RMPP, including deceased members. Clause 19(2) protects the relevant pension provision of each person who is or has been a member of the RMPP. In other words, it protects benefits that are payable in respect of a deceased member of the RMPP as well as of a member who is still alive. It is therefore the Government's view that Clause 19(2) already applies to protect the benefits payable to a dependant of a deceased member of the RMPP. The noble Lord, Lord Skelmersdale, was seeking reassurance on that. As the Bill already extends the protection set out in Clause 19 to dependants, I would ask the noble Lord to withdraw his amendment.
	Amendment 65, in the name of my noble friend Lord Clarke, proposes a more detailed definition of the "relevant pensions provision". I reassure my noble friend that the definition of "relevant pensions provision" as set out in subsection (3) would in practice cover all the benefits set out in his amendment. The definition in subsection (3) includes the payment of pensions and other benefits to which members are entitled, such as ill health benefits. I also assure my noble friend that the definition of "relevant pensions provision" also covers the link between accrued benefits and final salary.
	I have already explained the Government's intention to amend the rules of the RMPP so that, immediately following the transfer out of liabilities to the new public scheme, any disparity in benefit entitlement arising in relation to the link with final salary will be met from the continuing company-backed scheme. We do not want to risk narrowing the definition of relevant pensions provision set out in the Bill. As a result the Government are not able to support this amendment.
	The noble Lords, Lord Skelmersdale and Lord De Mauley, and my noble friend Lord Clarke have proposed an amendment which would remove subsection (4). This subsection makes it clear that Clause 19 does not require the Secretary of State to include any provisions in the new government scheme which would be incompatible with any obligations under UK or EU law, such as tax requirements or EU anti-discrimination requirements. Clearly it is important that the Government act lawfully in setting up the new government scheme, but as we work through the detailed drafting of the secondary legislation setting up the new scheme it is possible that some provisions may not be strictly compatible with, for example, the requirements for registration of a new scheme for tax purposes under the Finance Act 2004. In order to reassure my noble friend, I should stress that we expect any such issues to be of a technical nature rather than to have an impact on members' benefits. Nevertheless, we will need to maintain sufficient flexibility to ensure that the new scheme complies with UK and EU legislation. I would therefore ask noble Lords not to press this amendment.
	Amendment 67, proposed by my noble friend Lord Clarke, relates to Clause 19(5). Subsection (5) makes it clear that although Clause 19 is designed to protect the accrued rights of members, it is not intended to require the new government scheme to be set up or run in any particular way. For example, the new government scheme will be set up under legislation and not under trust deed. Any decisions that would be made by the Royal Mail Group under the rules of the RMPP would be made by the Secretary of State or the administrator to whom the Secretary of State delegates responsibility under the new scheme. Nor is it designed to constrain the future operation of the ongoing Royal Mail plan, which is a matter for the company and for RMPP trustees going forward, and is already governed by existing pensions legislation. Amendment 67 would constrain how the new government scheme would be set up and operated. As a result, this would limit the Government's ability to balance their objectives of protecting the universal postal service, protecting members of the pension scheme and protecting the interests of taxpayers, for example, from the investment risk in the funded scheme. As a result, I would again ask noble Lords not to press the amendment.
	I note that my noble friend Lord Clarke has proposed an amendment to delete subsection (2). I understand that this is intended to be considered as part of a broader package of amendments. I hope that the comments I have already made on Clause 19 will assure him that we are offering significant protection to members as part of this Bill. Similarly, in Amendment 68, he has proposed the deletion of subsections (6) and (7), which would delete protection for members from amendments being made to the new public scheme that would or might adversely affect accrued rights. This is an important safeguard for members which reflects the existing safeguards that, as I said, apply to them as members of the RMPP. It is not appropriate to apply the test proposed in Amendment 63, which would require benefits to stay the same in the new scheme going forward. This would even preclude changes being made that would be beneficial to members, for example to reflect future changes in law.
	Amendment 40, in the name of my noble friend Lord Clarke, appears to reinforce the effect of the amendments discussed in relation to Clause 19. I hope that I have dealt with that. The amendment risks adding real uncertainty about the fundamental basis on which members' benefits will be calculated. I therefore do not believe that it can be recommended. I am conscious that this has been a fairly detailed explanation on a whole raft of complex amendments which touch in particular on the provisions of Section 67, which pensions lawyers tell me is the most impenetrable part of pensions legislation. I hope that putting those issues on the record has enabled noble Lords to decide not to press their amendments.
	The noble Lord, Lord Skelmersdale, referred to FRS 17 and local government pension schemes. The new scheme that we are discussing would not be a funded scheme, for reasons that I think the noble Lord is aware of. He referred to the size of the deficit that we are dealing with. We have made clear in the RIA that the deficit has been calculated based upon the March 2008 criteria, which has been projected forward to March 2010. We have also said that those figures would be updated when the next evaluation is due for, I think, March 2009.
	The noble Lord also asked what would happen if state aid is not forthcoming. My noble friend the Secretary of State has made clear the linkage of these propositions. If the provisions in the Bill cannot be taken forward then the next evaluation would have to be undertaken and the trustees would need to engage with the sponsoring employer in setting out a recovery plan consistent with the regulator's directions and guidance on these issues. That would clearly be a challenging prospect but I hope that it is not one that we would face. I also hope that that has answered all the queries raised.

Lord Skelmersdale: My reaction to the Minister's speech is, phew—if I may be allowed in this Chamber to use a four-letter word. He, as he said, covered an enormous number of points. In retrospect, it was a mistake for the noble Lord, Lord Clarke, my noble friend Lord De Mauley and me to agree to such an enormous grouping. I do not know about the noble Lord, Lord Clarke, but, as a result, I certainly cannot make a point-by-point, justified response to the Minister.
	I should like to refer to just two points on this question of the deficit. The Government are working on a brought-forward deficit which I think was actually done in March 2006. That has been revalued as far as possible to March 2008. But the next—what was the word that the Secretary of State and I just used?—"definitive" uprating is to be the March 2009 revision. My question was about the basis on which that revision will be made. Will it be made on exactly the same criteria as the March 2006 calculation or will it use FRS 17, which I accept does not apply to public sector finances? I have yet to be told any good reason why it should not. I suspect that the deficits we are talking about are very much larger than we are led to believe at any particular moment. That is probably a subject for one of the noble Lord's letters. Not being an accountant, I shall be totally incapable of understanding— on my feet, as it were—what the Minister is itching to say. However, since he is itching, I might as well give him the opportunity.

Lord McKenzie of Luton: I am grateful to the noble Lord. It is unfair to ask me a question and then deny me the chance to answer it. He referred to FRS 17. I should make it clear that actuarial valuations are made on what is broadly known as a technical provisions basis, and that was the basis of the 2006 valuation updated to 2008. It uses broadly the same criterion basis that is reflected in the numbers produced for the March 2010 figures set out in the various reports. When the triennial valuation is undertaken it will be for the trustees, in discussion with their professional advisers, to look at the factors deployed and to produce the figures on that basis. FRS 17 is in this context a bit of a separate issue in that the bases of producing the provisions are not the same; there is divergence between the two. However, in the current climate it is generally seen as being particularly important to commercial transactions, so the technical provisions basis is the appropriate one to adopt.
	I am not sure whether that has helped or enlightened the noble Lord, and I am willing to write to him once he has looked at the record. Perhaps I may also say, in relation to the fairly complex issues we have been going through, that if any noble Lord thinks it would be beneficial to have a session before the Report stage, I am happy to accommodate that as well.

Lord Skelmersdale: I would certainly take up that offer with the very opposite of reluctance—I cannot think of the word at the moment. I think I am right in saying that in March 2006, FRS 17 was an idea in the mind of God and perhaps the odd accountant; it certainly had not come into general use at that point. I will take ready advantage of a meeting with either the Minister or his officials or perhaps, on a red letter day, both.
	I also picked up from what the Minister said that the provision to which we both referred—the power to prescribe the simple procedure by which one could bypass the consent of the members—was similar to that for the Armed Forces scheme. I do not have that Act in my pile of papers but I am sure that the Minister will have an extract of it. If memory serves me right, this formulation and the one set out in the previous Act are not pari passu, and therefore the words "based on" could have a slightly different meaning. Again, this is something that I can ask the officials in due course, unless the Minister would like to respond now.

Lord McKenzie of Luton: I am happy to write to the noble Lord to set out the precise provisions in the Act to see how close they are. The point I want to stress is that we are trying to replicate the facilities available to occupational trust-based schemes provided by Section 67 of the 1995 Act. The starting point is a general prohibition on impairment of accrued rights, which is what Section 67 is about. It says that you can do that if certain things are in place, in particular a consent process. However, there is a further provision which states that if things are set down in a prescribed manner, possibly in regulation, that can be done in addition.
	I stress that this provision should not be read as assuming that the Secretary of State can arbitrarily assume a directed, prescribed manner relating just to this scheme. That is not the intent of it. It is meant simply to replicate what would be available continually for the RMPP. Indeed, I believe that these provisions have been used by the scheme in fairly recent times.

Lord Skelmersdale: None the less, since this is not a trust-based scheme, does not the Secretary of State in a sense replace the trustees? I agree with the Minister that this should not be a trust-based scheme and indeed it is right that the Secretary of State should take full responsibility in this area. Here, I suspect, our opinions diverge substantially from those of the noble Lord, Lord Clarke, who no doubt has the opportunity right now to tell us just that.

Lord Clarke of Hampstead: I was not responsible for the size of this group of amendments. The noble Lord, Lord Skelmersdale, made the point, and perhaps we should both have been quicker on our feet to ensure that we could give proper, individual attention to some of these issues.

Lord Skelmersdale: I am just as guilty as the noble Lord. Perhaps, after his remarks, I am even more guilty, in which case I apologise to the Committee.

Lord Clarke of Hampstead: I am delighted to hear a confession although I am not ordained to receive it. More seriously, this grouping was far too big to start with. I made some changes to the groupings as they came out last night. The Whips' Office was quite accommodating and able to separate some amendments, in particular the new clause I suggest later in Amendment 70.
	My interpretation of this whole thing is that it is headed, "The protection of members' interests and benefits". I must say in all humility that it is a pleasure to hear an expert such as my noble friend Lord McKenzie, who is clearly on top of his brief. But he is not relying on it: he is using experience and knowledge of the pensions industry. That is valuable to the Committee and I am sure will be of even more value as we proceed through the Bill. I would have liked to separate the protection of past service rights in Amendment 63 from some of the others.
	We have heard quite a bit this afternoon, but I am an old-fashioned person and I want to read exactly what has been said. I have only been here for just over 10 years, but I have heard too often that it is not necessary to put something on to the face of the Bill. Speaking as a former trustee of the Post Office pension scheme and as a negotiating officer to introduce amendments to schemes, I know how valuable it is to get the words right and how the ambiguity of certain things has to be avoided, although I recognise the expertise that has been demonstrated by my noble friend Lord McKenzie in this debate. I am tempted to pick up on some points that would probably put me in bad odour with the Whips, such as the references made to the universal postal service. I hope that we will get a chance to discuss that in detail later on.
	I want to see these things on the face of the Bill, but for today I shall take away what has been said, and I heard the Minister's offer on consultation—which makes a change from last week when consultation was not seen as the proper or appropriate word. However, I give notice that this response is going to be scrutinised because I want those who can help me with their expertise to see if there is not a way to get what we all want: the protection of members' rights, members' benefits, the rights of those who succeed them in the case of death, and all the issues I mentioned when moving this welter of amendments earlier. For now, I beg leave to withdraw the amendment.
	Amendment 40 withdrawn.
	Clause 15 agreed.
	Clause 16: Transfer of qualifying accrued rights to new public scheme
	Amendment 40A
	 Moved by Lord Skelmersdale
	40A: Clause 16, page 8, line 14, leave out "Secretary of State" and insert "Treasury"

Lord Skelmersdale: I was brought up, parliamentarily speaking, to believe that when the words "the Secretary of State" appear in legislation, they apply to any political departmental head. This is a very simple probing amendment to discover which Secretary of State it is anticipated will be responsible for the decisions made under this part. I have tabled only one amendment to Clause 16, but intend to speak as well to the various places where the words "the Secretary of State" appear throughout these provisions.
	This Bill has already been defended and clarified by the Secretary of State and more recently by the noble Lord, Lord McKenzie of Luton. Who knows, when we move on to Part 3, we might have a Minister from the Department for Culture, Media and Sport, which after all is the sponsoring department for Ofcom, which is to be the regulator under the new scheme of things, and thus we shall add a third. The question of which department will exercise some of the powers in the Bill is therefore not nearly as clear as normal.
	Given that, in part, a Minister from the DWP has spoken for the Government on this part of the Bill, it is likely that that department expects to handle the pension provisions, but is that the case? I would be happier if the greater expertise in that department, which was referred to by the noble Lord, Lord Clarke, in respect of the noble Lord, Lord McKenzie, decided what the new pension scheme will look like, how many assets and liabilities will be transferred and how the ongoing RMPP will be handled. I hope the Minister will reassure me that his department will do all these things.
	The noble Lord, Lord McKenzie, will remember that I have spoken before about the mishmash of responsibilities that the Government have divided between the Treasury and the DWP for what I still regard as social security matters. I cannot believe that the Treasury will be willing to give up all control in the area of the Royal Mail pension plan. Indeed, there are occasions in the Bill where the Secretary of State, whichever Secretary of State it may be, can act only with the consent of the Treasury. The transferred assets under Clause 20 will obviously be very attractive to the Treasury. Can the Minister give some clarity on who will have the final say on what will happen to the money resulting from the eventual sale of those assets?
	The taxation provisions in Clause 22 will also, presumably, fall under the Treasury rather than the DWP. We would be rather wary about that given the example of a previous time when the Chancellor amended the tax provisions relating to pension pots and executed the £5 billion a year tax raid on occupational pensions. I shall not go into detail, I am sure to the Minister's relief.
	I know that it is not customary to specify departments on the face of primary legislation. Governments are generally too fond of reshuffling and rebranding departments of state for any name to survive the length of time we hope the Act will last. Indeed, I remember that under the Thatcher Government various Secretaries of State took bits of their own departments with them because they felt an affinity with those particular pieces of their former departments. I remember that the subject of tourism whistled round Whitehall like a rather weak gale. I hope the Minister will give a little more insight into how the Government intend to handle the tensions between departments that will no doubt arise from these provisions. That is the important point. Forget all the joshing I have just executed.

Lord Mandelson: The short answer, of course, to the noble Lord, Lord Skelmersdale, is that his characterisation of the Government is not one that I begin to recognise. I do not know where the tensions that he talks of exist or what possible diversion there could be between the views and interests of the head of one department and another, even the Treasury.
	Having come to the end of those short remarks, let me make a direct response to the questions put to me by the noble Lord. I should start by clarifying the relationship between the powers of the Secretary of State and the role of the Treasury as set out in Part 2. The Government propose that the power to establish a new public service scheme should rest with the Secretary of State. This is consistent with the precedent set by other legislation under which new public service schemes have been established, such as the Armed Forces (Pensions and Compensation) Act 2004, and on which these provisions are modelled. It is also consistent with the position in relation to the other powers provided for in Part 2 where these rest with the Secretary of State. The Government do not see the justification for a different approach in relation to the powers provided in Clause 16(1).
	I also emphasise that Clause 24 requires the Treasury to consent to the exercise of any powers under this part of the Bill. Indeed, the Treasury must consent to all orders other than information requests. This includes, for example, setting up the new scheme and transferring assets and liabilities. Such decisions have a significant public finance impact so it is appropriate for the Treasury to approve this. However, it is not the intention for the Treasury to be involved in the ongoing management of the pension scheme. This will be the responsibility of the Secretary of State and any person nominated by the Secretary of State.
	As to which Secretary of State of which department will be responsible, it will be implemented and managed by my department, the Department for Business, Enterprise and Regulatory Reform. Given this fact, there is nothing to be gained from assigning a power directly to the Treasury.
	The noble Lord also asked what will happen to the funds from assets sales. The assets transferred to government will be disposed of, over time, as makes most sense for the taxpayer. The proceeds from their disposal will contribute towards meeting the costs of future payments to pensioners.
	In the light of that information and clarification, I invite the noble Lord to withdraw his amendment.

Lord Skelmersdale: I thought it was obvious from what I was saying that this was a probing amendment. However, I have got the answer I wanted. When the Secretary of State started to reply, I immediately thought "Come off it". He does not recognise the description of Governments that I gave? Of course he does. He knows perfectly well that battles royal go on almost daily between officials—sometimes very senior officials and very often involving their Secretaries of State—where departmental requirements differ diametrically from each other. I have absolutely no doubt that this happens under all Governments of all political persuasions and has done ever since Governments were reinvented. Many years ago, of course, we had only two departments of state but, alas, those days are gone for ever.
	I am pleased that the Secretary of State's department will be in control throughout, although he admitted that it will be with the advice and sometimes the consent of the Treasury. Every now and again, I suspect, he will also find the need for advice from the pension section of the Department for Works and Pensions. Be that as it may, we now know that there will be one person and one department in overall control of the situation and I am very pleased to hear it. I beg leave to withdraw the amendment.
	Amendment 40A withdrawn.
	Amendment 40B
	 Moved by Lord Skelmersdale
	40B: Clause 16, page 8, line 17, at end insert—
	"( ) No order may be made under subsection (1) until—
	(a) after the day specified in an order under section 60 for the commencement of the repeal (by Schedule 10) of sections 65 and 66 of the Postal Services Act 2000 (c. 26) (restrictions on issue or disposal of shares in the original holding company etc.); and
	(b) Part 3 has come into effect."

Lord Skelmersdale: This amendment would ensure that Part 2 of the Bill—concerning the taking over of the assets and liabilities of the RMPP, to a little of which the Secretary of State has just responded—could not happen without the reorganisation, part-privatisation and establishment of new regulatory reform that Hooper specifically tied together in this review. I think, from discussions earlier today with the Secretary of State, that I have already had that confirmation.
	As my noble friend Lord Hunt said at Second Reading, we on these Benches accept the Hooper review in principle. Given the appalling size of the RMPP deficit, we agree that, regrettably, it is necessary to take on some of the liabilities. However, we are fully in agreement with Hooper that this rescue is contingent on putting the Royal Mail on a secure footing for the future to prevent the need for any more taxpayer money going to subsidise a company that, to say the least, has failed to keep up with the times.
	The Government have accepted that recommendation too. Their policy paper laid out clearly that they accept the review "as a package". It went on to say:
	"Tackling pensions on their own would not be a panacea for Royal Mail's difficulties".
	Is it not a fact, though, that Royal Mail is now reserving some £283 million a year to fill the hole in its pension deficiencies? That means it will have that amount of money available for investment in its activities. The policy paper goes on to say:
	"Indeed, it would be irresponsible for the Government to tackle the pensions alone without the policies in place to ensure that Royal Mail can transform quickly to compete in a fast-changing market".
	I could not agree more.
	The Secretary of State elaborated further on that point at Second Reading. He expressed his view that,
	"it is inconceivable that the public will accept such a 'bail-out' without the Government taking steps to ensure that the company has a transformed future".—[Official Report, 10/3/09; col. 1067.]
	We agree with him, and we certainly agree with Sir Richard, that the Government must do the job properly. It is therefore deeply worrying that the Secretary of State has not seen fit to put that commitment in the Bill.
	We have already discussed today several areas of the Bill that could be used for very different purposes from those that Ministers on the Benches opposite say that they intend them for. On the whole they have given reasonable explanations for why the words in the Bill are required. I will study carefully the ones that I am initially suspicious of. The Committee has also heard the serious opposition from many of those on the Government's Back Benches to Part 1 of the Bill, as opposed to the much more friendly reception they have given to the general principle behind Part 2. I do not want to be thought unduly cynical, but some reassurance from the Government that they will not give in over the coming months and drop the more unpopular part while pushing ahead with Part 2 would be very welcome. I am not sure that I have had that assurance in quite so many words; if the Secretary of State would like to give it to me, we can dispose of this matter immediately. I beg to move.

Lord Razzall: Contrary to the precedent that has been exhibited in the past three hours, I agree.

Lord Clarke of Hampstead: I could not resist the temptation to comment on the view of the noble Lord, Lord Skelmersdale, about making transformed Post Office business part of the deal. This is a good opportunity to dispel some myths about what goes on at Royal Mail. Until recent years, nothing could be done by management without political interference and direction. The whole question of the deficit has come about as a result of the 12 to 13-year pensions holiday, which the Government endorsed. The first of those years was estimated to have cost Royal Mail, in those days, £100 million. If you are looking at losses like that over a decade, you realise how the pension fund got into this difficult position.
	When the noble Lord says that this should be part of a deal for modernisation, I am not sure that he is aware of the strenuous efforts that are being made at this moment to introduce the machines that I mentioned earlier, the enhanced optical character recognition machines and the walk-sequencing machines. The latter will transform post offices so that people can go in and pick up a bundle that has been pre-sorted and is ready to go out because the walk sequencing is working to a plan. I will talk about those machines again later on, because I still do not believe that they are in this country—although I have to accept the Secretary of State's comment at Second Reading that they are in wraps. We will come to that at the appropriate time.
	Strenuous efforts are being made to modernise the Post Office. The agreement over the introduction of a change in working methods is now two years old. The workers in the industry received a cash bonus for the agreement they made, and they are honouring it. I am informed that as recently as yesterday 98 per cent of the delivery offices are working under, or have made agreements for, the new plan. It is not my job to defend the Post Office management—I have spent most of my life opposing them—and, as I have said before, I am not here as a sycophantic supporter of the Royal Mail board, but it has to be said that political interference on tariffs, service provision and the cuts in services that have been mentioned today have all been properly addressed.
	The excuse that is being used to privatise the Post Office is based on the false premise that our people—I say "our people" because I am a retired postman—are not working as they should. They have honoured their part of the agreement. The management are faced with a big problem over the pension deficit, but that is not a problem of modernisation; the profit that the company is now making, together with the relief from the pensions deficit, could in fact fund the future modernisation that is required. I am talking not just about those two machines but about delivery aids, trolleys—things that were never heard of in my time. There is a willingness on the part of people in the industry to work with management.
	This is not the first time I have said this and I will probably say it again: we do not require people from outside to come in and add to the 50,000 jobs that have already been lost. The Post Office and its unions can work together if given the right to do so, and I know for a fact that the union I was once a proud leader of—deputy leader; I should get that right—is up and ready to face the future. When anyone talks about "a transformed company for the future", please do not run away with the idea that these people are not trying to put their backs into trying to save a wonderful Post Office for the people of this country and provide the service that they need.

Lord Hoyle: I welcome my noble friend's remarks. He talked about political interference and the pensions holiday; he could also have talked about the money that was taken out by the Treasury prior to that— £2.41 billion from 1988 to 1999. He is right to refer to that.
	He is also right to put on the record again, as I tried to do earlier, that the Post Office is modernising, although it is accused of not doing so. It has spent the £1.2 billion that he has referred to, £600 million of it on machines that are already in. Some of the orders for other machines have to be placed early, and it is now awaiting delivery of those. So modernisation is going on.
	My noble friend referred to the 50,000 workers who have been made redundant. The Post Office does not need this. The Bill means that we take the pension deficit and the company coming in takes the profit. That is nonsense, and I am glad that he has reiterated that. It is right that we put on record as often as we can what the Post Office has done already and how unnecessary this private investment, or part-privatisation, is.

Lord Mandelson: The Government have made it clear that they accept Richard Hooper's review's recommendations as a package in the way that they were originally proposed. I say in response to earlier comments that the reason that we have accepted Mr Hooper's review and recommendations so promptly is that rarely has such a well researched, analysed and argued report been presented to government. Its competence and compelling case left little room for argument. That is why we are not going to select one recommendation to the exclusion of another. All three principal recommendations, on partnership, pensions and regulation, are required to be implemented if the challenges facing Royal Mail are to be successfully addressed and the universal postal service secured.
	It is important for the Royal Mail's workforce to understand this because it is in danger of being misled by voices in this debate which say that the Government will have to bail out the pension deficit in all circumstances and that it need not be linked to the other recommendations in the Hooper report. That is not the case. I have already highlighted the extremely unattractive scenario in which a pension bail-out was not accompanied by properly managed modernisation and reform. Quite simply in this case, the state clearance powers of the European Commission could be used brutally to require accompaniment of the bail-out by a far reaching, enforced restructuring of the company rather than one readily volunteered by us.
	This state aid dimension apart, tackling pensions on their own would not be a panacea for Royal Mail's difficulties; indeed, it would be irresponsible for the Government to ask the taxpayer to tackle the pensions issue without giving the taxpayer confidence that a plan was in place to ensure that Royal Mail could quickly transform to compete in a fast changing market. In other words, we need both to secure the future of the pension fund and ensure that the company's finances are not simply eaten away in the future because it has failed to modernise and automate, a challenge which other European postal services have taken on and in which they have succeeded.
	I turn to the detail of the amendment. The proposed linkage with the repeal of the provisions in the Postal Services Act 2000 fails adequately to reflect the linkage in that package that the Government believe is essential. The repeal of those measures is an important enabling measure, but it does not in itself achieve the link to the partnership agreement that the Government believe is fundamental to the modernisation of Royal Mail and a precondition for the pension proposals and their implementation.
	Similar issues arise in relation to the proposed linkage to Part 3 coming into effect. Although Ofcom will assume its new responsibilities as soon as possible after Royal Assent, there are other measures in Part 3 related to the abolition of Postcomm where accounting and other legal requirements mean that implementation may take a little longer. It would be both artificial and counterproductive to establish a link in legislation between the implementation in full of Part 3 and the implementation of the measures in respect of pensions. It would increase the uncertainty for all parties, not least the scheme members, and introduce delay at a time when the Government must press ahead with the whole package of measures as soon as possible.
	Following Hooper's recommendations, the Government are clear that if the challenges facing Royal Mail and the postal services sector are to be addressed successfully, all the measures in the Bill need to be implemented as a package. I understand the motivation behind the amendment and am sympathetic towards its intention of ensuring that the proposals are treated as a coherent package, but it does not achieve it in a practical manner.
	In the light of what I have said in explaining the effect of the amendment, and the Government's overall intentions in terms of the implementation of their proposals on pensions, I trust that the noble Lord, Lord Skelmersdale, will feel able to withdraw the amendment in this form.

Lord Clarke of Hampstead: I listened carefully to the Secretary of State. He described the Hooper report as well researched. If you look at how it has researched the cost of the final mile, which is the expensive part of delivery, you might find it wanting. A number of people who are far superior to me in intelligence and their academic ability to analyse things find that the Hooper review is not as solid as some people would pretend. I know why the Government snapped it up: they wanted that embracing comment, which we have just heard, about putting all the things together.
	The Secretary of State made a sly remark about a pensions bail-out giving the wrong impression—it might have been meant for me; if I am wrong, I am sorry. In the final analysis, Post Office pensioners are, or were, employed by the Crown. The reason that the long holiday to which my noble friend Lord Hoyle referred took place is clear. Besides being a trustee of the pension fund, I was the negotiating officer for pensions. When it was announced that the 6 per cent paid by the staff would continue but that the management would put nothing into the scheme at first, you could live with it for a year or so. I took the matter to the legal profession and asked how right their action was. The reason that the holiday was enjoyed by the management and, in turn, the Government was that the trustee explicitly said that as the fund—thereby, the Government—had responsibility for deficiencies, it had the right to deal with surpluses. It was game, set and match to the lawyers; I folded up my tent and went home. I could not do anything about it; it was there in black and white.
	We are told about modernisation. Would somebody in government say what they are talking about? A fortnight ago, staff and management had two days of very constructive talks. They have agreement on the things that need to be done. There are slippages in a couple of areas which are being addressed. But when someone says "modernisation", would they please say what they are talking about? Everything that postmen used to do—primary sorting and regional sorting throughout the British Isles and the foreign section—has gone. Postcodes took away that skill of sorting and working out where mail should be directed to. We in the unions have co-operated with the postal-coding of this country. It is another wonderful victory for Britain: we perfected it and got no money for it when other people copied it—the same could be said of Giro and optical character recognition. But that is all in the past, which I have been told off before for living in.
	If the Government have got their sums right as they bail out banks and building societies, they expect the tide eventually to turn and the value of the scheme to go up accordingly. It is based on the current values of equity and shares. If they are right, more money is likely to come in, because the pension fund deficit is being addressed with the amounts of money that I have mentioned previously.
	It has been said that European postal administrations have done this, that and the other. There was a conference last Saturday in Amsterdam. The Dutch model, crowed about by some people, was condemned by the Germans, the Danes, the French and the Belgians. People are having second thoughts about the way in which the Netherlands postal authority—

Lord Hoyle: There are also the remarks that that service has faced up to the market. It has not faced liberalisation, as my noble friend would agree. In fact, it is only just coming in in Holland, and many other countries have not even applied it.

Lord Clarke of Hampstead: My noble friend is of course right. The noble Lord, Lord Sainsbury, stood there telling me that we had to do it, and in haste, because we wanted to be ahead of the game, that we had to be trend-setters for European postal services. He said it more than once—and he said that I had nothing to worry about and that they were doing what the European directive said. I wish somebody had asked the French when they were going to start to liberalise their service, because they have not even thought about it yet. If they have thought about it, they have got rid of the idea, because they know it would cost them.
	I know that I am a sensitive person, but before people tell me how good these postal services are in Europe they should think about how much they charge for their service, how much they have had invested in them and how much their Governments have supported them. They should think about the service levels and compare that with the appalling service that we give our customers today. How many Members in this House this evening got their mail before they left home? How many people got their mail even before lunchtime? They probably were on their way in and do not know what time the postman or postwoman called. We give a pretty poor service, and it is all under the name of modernisation. You come in and pick up a bundle of mail and go round the streets. The idea is that, instead of having a postman with a full-time job doing delivery and other duties, the workforce is made casual and part-time so they are like the Washington postmen, who go round with their funny hats on and deliver all day. They call them letter carriers, not postmen. That is what is behind this.
	It is about time that people started speaking not, as old John Wayne used to say, with forked tongue, but directly. I will never come to this Chamber and say anything that I do not passionately believe in. If everyone in our Government is in favour of this, and united, as I was told, by the Secretary of State, I think that somebody, somewhere, may have a forked tongue.

Lord Skelmersdale: I know that sometimes when I speak it is not in words quite as emollient as the Secretary of State, but what on earth did I say to cause the original explosion from the noble Lord, Lord Clarke of Hampstead?

Lord Clarke of Hampstead: With respect, it was not the noble Lord's comment but the Secretary of State saying that it has to be a properly managed, modernised service. With respect to the noble Lord, Lord Skelmersdale, I would not question his judgment for a moment.

Lord Skelmersdale: Well, what on earth do I say to that? However, the noble Lord, Lord Clarke, in his original explosion, spoke immediately after I had spoken and before the Secretary of State had spoken. His secondary explosion, which was, funnily enough, rather more muted, came after the Secretary of State had spoken. So let us get our very modern history—so modern that it is not even taught in secondary schools in this country—right.
	Of course, I was delighted to hear yet again a different formulation of exactly the same theme from the Secretary of State. I go along with that 100 per cent, unlike the noble Lord, Lord Clarke. Perhaps after the noble Lord's words I should revise my declaration of interest, which I said was not pertinent to this part of the Bill. We have had so many semi-Second Reading speeches this afternoon that I think it probably is pertinent. I only add that when I was engaged I was in this country and my wife was in Zambia; that was in 1971, which I am sure the noble Lord, Lord Clarke, will remember very well indeed, because there was a national postal strike and it made it very difficult indeed to woo my future wife. However, despite the post office I did succeed. I hope that the Secretary of State will take some comfort from that.
	The fact is that there are many things in the post office—relations between the management past and present and the unions past and present—that are not conducted as speedily or efficiently as they are in other organisations. The noble Lord talked about the sequencing machines; he admitted that it took two years for them to be deployed in 98 per cent of sorting offices.

Lord Clarke of Hampstead: Walk-sequencing machines are not yet installed. The modernisation agreement that I referred to embraced other things, such as staff revisions and reduction of certain services. At the moment, as I have said several times, although I am told that they are in wraps in this country. On the website of the German company SOLYSTIC—it is in German, but it is easily translated—it is clear they have orders from others. Even if we were to wave a magic wand now, it could not be done, because those machines are not available. They have been trialled and they work very well, but they were not part of the first two years of the modernisation programme, which was designed to last for four years.

Lord Skelmersdale: It is not for me to perform the role of the Secretary of State in this debate, so I shall cease forthwith. However, I will offer an olive branch to the noble Lord, Lord Clarke, if between now and the next stage of the Bill he will supply me with, for example, the union briefs which he is clearly using and which I have not yet seen. I shall read them with great interest. As I said, ever since 1981, before I got involved with my mail-order firm, I have been interested in the Post Office. I have spoken for the Government on the Post Office in years gone by, and I shall retain my interest in it and its efficiency for a very long time—probably for as long as the mail continues to arrive. Having said that, of course I beg leave to withdraw the amendment.
	Amendment 40B withdrawn.
	Amendment 40C
	 Moved by Baroness Turner of Camden
	40C: Clause 16, page 8, line 20, at end insert—
	"( ) On making an order under subsection (2) and prior to the transfer of qualifying accrued rights, the Secretary of State must—
	(a) inform all members affected that they are to be transferred to a new statutory scheme,
	(b) inform all active and deferred members of their accrued rights in the new statutory scheme,
	(c) inform all pensioner members of the details of payments from the new scheme and when they will commence,
	(d) inform all members of the details of administration of the new scheme."

Baroness Turner of Camden: Amendment 40C stands in my name and that of my noble friends Lord Clarke and Lord Hoyle. I was persuaded to put down this amendment because I was contacted by Unite, which is the federation looking after occupational pensioners. It wrote to me to say that pensioners in the Royal Mail were extremely concerned about their future. It believed, quite rightly, that any changes in the Royal Mail pension scheme should not reduce the pension rights of current members of the scheme.
	The union called Unite therefore believed that there is a need for clarification about what the Government's proposed changes to the scheme mean for the future rights of members. It points out that the Bill proposes to establish a new statutory scheme run on a pay-as-you-go basis and backed by UK taxpayers, and believes that this represents a significant increase in pension security for the Royal Mail members. However, it tells me that, despite extensive press coverage, many Royal Mail pension plan members are ignorant of the changes potentially causing unnecessary upset and worry, particularly for older pensioners. It has therefore produced this amendment, which is designed to ensure that the people concerned are adequately informed. It wants to ensure that the Secretary of State has to inform all active, deferred and pensioner members of changes. It wants the members affected, if they are to be transferred, to be told about it. It wants all active and deferred members to be told of their accrued rights under the scheme. It wants pensioner members to be informed of details of payments for the new scheme and when they will commence. Quite obviously, it wants members to be informed of the details of the administration of the scheme. It wants to know how the thing works and to ensure that people know all about it so that their worries about the future can be laid to rest.
	I was very interested in the debate on the previous set of amendments—all very complicated. I made a note of what my noble friend Lord McKenzie said because I was so impressed. He said that member protection is at the core of the Government's proposals in the Bill. I was glad to hear it because I am sure that that is the view of many of my noble friends on the Front Bench. They are concerned to ensure that members' rights are fully protected. However, protecting members' rights also involves ensuring that they are kept adequately informed. The members must know what those rights are and what is being done to ensure that they are always protected. That is what this amendment is all about. It is highly moderate. It does not break any new ground as far as I can see. It is the kind of information that one would expect providers of pensions to make available to the people whom they are endeavouring to cover. I therefore hope that my noble friend the Minister will be able to accept it or something very similar. I beg to move.

Lord Hoyle: I support the amendment. It is moderate and I hope that the Minister will accept it. All that we are asking for in relation to this is information being given to members to make them aware. My noble friend Lady Turner was right to say that we have heard from Unite and other pension schemes that a lot of the members are still, despite what is being done, ignorant of the changes taking place. We are asking for information to be given to them about what is happening. That would remove a lot of the doubts and fears that many of them have.
	It is right that pension schemes are changing, because people's security for the future is at stake. Anything that can be done to allay those fears and make people aware of what is taking place and whether it will affect them will be a great help. It will put many of their minds at rest in relation to the pension scheme itself. I should be very pleased if my noble friend would accept the amendment.
	I see that the noble Lord, Lord Skelmersdale, appears to be retreating, but I should explain to him that we are not talking from a brief from our union Unite—we are speaking about a brief from the pensions organisation. My noble friend is a very reasonable person and I thank him for the explanation that he has given already. I hope that he will accept this modest amendment, which would help a lot of pensioners and would make them aware of what is actually happening to their pensions.

Lord Razzall: I have a short comment in support of the amendment. I was surprised when the noble Baroness, Lady Turner, said that she had received a letter, and I cannot resist making the same point that I made at Second Reading. It is noticeable that most of the lobbying that we have received for this debate came by e-mail, which demonstrates exactly the problem that the Royal Mail now has. The competition which causes many of the problems that produced this Bill comes not from other postal operators but from the e-mail structure. The huge lobbying that we have received from Unite came by e-mail, which demonstrates the problem. The point made by the noble Baroness and the noble Lord, Lord Hoyle, seems eminently sensible. I will certainly support the amendment and I fail to see why the Government cannot agree it.

Lord De Mauley: I thank noble Lords for tabling this amendment. Like the noble Lord, Lord Razzall, who voiced his support, I agree with the principles behind it. We on these Benches have repeatedly raised our concerns during these debates that the Government's chosen method of proceeding with their policy seems almost designed to cause as much confusion and uncertainty as possible.
	It is no wonder that Royal Mail pension plan pensioners, deferred or otherwise, are concerned about what the Bill means to their pension entitlements. The Government have attempted to tread the impossible line between trying on the one hand to reassure their Back-Benchers that part-privatisation is not, in fact, part-privatisation, while trying to reassure taxpayers on the other that there will be no guarantee of Royal Mail pension plan liabilities without part-privatisation. The whole matter is made worse by the fact that the Bill does not provide much reassurance either. As a later group of our amendments highlights, the safeguard that pensioners will not suffer material adverse effect is buried deep in technical jargon and surrounded by exceptions and omissions. The Government are given enormous powers to do almost anything with remarkably little scrutiny or transparency.
	We therefore support the amendment as far as it goes. In fact, I would prefer that it went considerably further to cover the necessary transparency and scrutiny that this part of the Bill requires, but this would go some way to ensuring that those most affected are at least kept informed. We will save our encouragement for more stringent safeguards until we come to later amendments.

Lord McKenzie of Luton: I thank my noble friend Lady Turner for introducing this amendment and for all noble Lords who spoke on it. It is an important area. I also had the opportunity of meeting Unite—the pensions organisation, not the trade union, although I would be happy to meet representatives of the union as well.
	Amendment 40C requires that prior to the transfer of qualifying accrued rights, the Secretary of State must take certain steps to inform members of the new pension scheme about the details. In responding, I hope I do not disappoint my noble friends if I start by saying that the Government agree with the spirit of what is intended behind this amendment. It is quite appropriate that members should be made fully aware of what changes are being made and the effect that they will have on them. I would like to take the opportunity today to give some reassurance on the record.
	First, I would like to make it very clear that pensioners currently receiving payments will not see any reduction in their pensions. Their pension entitlement will be the same but will be paid from a different source—the new public scheme. Secondly, for members who have already left service, their accrued rights will be the same as when they left service. At the point they start to draw their pensions they will receive the same amount as they would have under the RMPP. Again, it will be paid from a different source—the new public service scheme. Finally, for active members still employed by Royal Mail, there will be no reduction in the rights that they have already built up. What will be different is that rights accrued up to the cut-off date—16 December 2008—will become payable from the new public scheme as though the member had left service on the cut-off date, with the remainder being paid by the RMPP. In other words, the total amount of pension payable to a member for service built up prior to the cut-off date will be the same, but it will simply be received from two different sources.
	We are absolutely committed to working with the RMPP trustees to ensure that the administrative implications are as smooth as possible—an area of concern raised by Unite—with the minimum disruption for members. Work is already under way with the trustees to discuss this and to develop a proper transition plan in the lead-up to implementation.
	The first condition of the amendment would be that the Secretary of State must inform all members that they will be transferred to the new scheme. Before the Government can transfer anyone they must make the order to do so with the detail of what the transfer will entail. Furthermore, under Clause 24, the Government are obliged to consult the RMPP trustees before any order is made. We will discuss this in more detail under Clause 24, but I can reassure Members of the Committee that, as part of this consultation with the trustees, the Government are committed to ensuring that proper communication is undertaken with members leading up to implementation. It is not, however, appropriate to make it a requirement on the Secretary of State. The RMPP trustees already have in place regular and effective communication with scheme members, and we are discussing what they intend to do going forward. I will certainly convey the thoughts of my noble friends on concerns that they have experienced in talking to members of the scheme. So, while the spirit of this subsection is quite appropriate, it is not sensible to put a requirement on the Secretary of State for something that may well result in duplication.
	Secondly, the amendment would require the Secretary of State to inform members of their accrued rights and entitlements before the transfer occurs. As I have said, members' pension entitlements accrued up to the cut-off date are not changing under the proposals. All benefits accrued until the transfer date will remain exactly the same. We will, however, discuss with the trustees what their intentions are with regard to informing members about the transfer and its effects. Again, however, to require this in legislation may actually result in duplication.
	Finally, the amendment requires the Secretary of State to inform all members about the administrative consequences. This is clearly important. As I have said, we are working closely with the trustees to develop a detailed transition plan which will include discussion on the most appropriate communication to scheme members. However, I do not accept that this should be a requirement on the Secretary of State before the qualifying accrued rights have been transferred. If members are aware of the changes through communication from the trustees, it would be more sensible for the new scheme administrators to inform members of the detailed administrative mechanisms at the appropriate time, rather than the Secretary of State being required to do so prior to the transfer.
	There is a further important reason why I do not think these amendments are strictly necessary. The Occupational Pension Scheme (Disclosure of Information) Regulations 1996—to which my noble friend Lady Turner referred—impose disclosure obligations on the trustees or administrators of an occupational pension scheme. They apply to other public service pension schemes and we expect that they would also apply to the new scheme being set up here. This would require a copy of the documentation establishing the scheme to be available to members on request, which in this case could likely be met by virtue of the details being set out in the secondary legislation. The regulations also require that basic information about the scheme—including, for example, what benefits the scheme provides—be given to all members either before a member joins or, if that is not practical, within two months of the person becoming a member of the scheme.
	In conclusion, I very much agree with Members of the Committee that communication with members is critical and, for this reason, the Government have already started engaging with trustees to discuss what is appropriate in these circumstances. However, as I have explained, the amendments are unnecessary and, indeed, could well restrict flexibility and create duplication. On this basis, which I hope has been reassuring to Members of the Committee, I hope that my noble friend will not press her amendment.

Lord Neill of Bladen: Is the Minister really agreeing with the noble Lord, Lord Hoyle, that one of the things wrong with the amendment is that it is far too modest? It is aimed at a particular point in time: before an order is made. As I understand him, the Minister is saying that there should be a continuing duty to ensure that members and former members are kept informed—not just as a one-off, as the amendment says—and that that obligation should be performed under the scheme that he has in mind for exactly the reasons in the paper that I have also received from Unite: a lot of people out there are not currently aware of their rights. A continuing policy of information would be first-class. If the Government undertake to do that, I can see no reason why the amendment would be necessary at all.

Lord McKenzie of Luton: The key issue is whether the requirement should be imposed on the Secretary of State, or whether that is a role for the trustees or the administrators of the scheme. The channel we are currently proceeding through is to engage with trustees, who obviously already have lines of communication with members of the scheme, deferred pensioners and active members. On whether—

Lord Neill of Bladen: Of course, the Minister will be a position to put great pressure on the trustees to carry out the duty that we have been talking about this afternoon.

Lord Hoyle: Absolutely!

Lord McKenzie of Luton: It is partly a question of where the statutory responsibility lies. As I was explaining, it would not be helpful to impose that on the Secretary of State. They key point is that, in practice, if there is full engagement, which I believe we have, there will be encouragement of the trustees through various means and at various points in time to communicate with those affected. I think that we are in agreement that it is important that those affected by these proposals understand it and can be reassured. That is what they should take from these proposals: it is a significant potential benefit.

Baroness Turner of Camden: I thank my noble friend for that full response, and Members of the Committee who have participated and supported the amendment tabled on behalf of pensioners. I am glad to learn that, as the Minister says, the spirit of the amendment is fully accepted by the Government, and welcome all his assurances on that. I also agree with the noble Lord, Lord Neill, that the amendment is too modest. We should take that on board when we study what has been said in Hansard. It was quite a lot to take in and I would like to study it; I am sure that my noble friends would as well. In the mean time, however, I beg leave to withdraw the amendment.
	Amendment 40C withdrawn.
	Amendment 41 had been withdrawn from the Marshalled List.
	Amendment 42
	 Moved by Lord Skelmersdale
	42: Clause 16, page 8, line 21, leave out subsection (3)

Lord Skelmersdale: My Amendments 42, 45A and 47 in this group probe the Government's intentions in Clause 16 a little further. Subsection (3) contains several powers that I am sure the Minister will protest are perfectly benign and useful, but which could certainly be used to make significant changes to the new pension scheme in the future.
	Paragraph (a) will apparently, according to the Government's memorandum to the DPRRC, be used for standard uprating of pension rights in line with the RPI, as the Civil Service and teachers' pension schemes are. That is, of course, unexceptional. What is more concerning is that the Government have decided not to specify this use in the Bill. Uprating state pension rights in line with earnings rather than with inflation was a significant policy shift and new commitments on what measure to use in uprating various benefits and pensions have been specified in many different pieces of legislation. Does not the Minister think that it would be reassuring to pensioners to have the basis of any uprating specified in the Bill? It would not only give them certainty but add welcome specificity to a widely drawn power.
	I am afraid that paragraph (b) is totally beyond my comprehension. I do not understand at all what it is for. A close reading of the Explanatory Notes and the memorandum seems to suggest that by considering a deferred pensioner as an active pensioner, it would be possible in certain cases to pay him more than would otherwise be the case. I do not understand why paragraph (b) would be needed in addition to paragraph (a) if that was all that this provision was required to do. I hope the Minister can explain it further. Paragraph (c) is similarly difficult and is not made any clearer by the reference in the memorandum to a piece of legislation which was repealed a long, long time ago.
	My next amendment probes subsection (4). Why have the Government not ensured that a new public scheme will be treated as an occupational pension scheme? Why is the matter being left uncertain once again? The new scheme has not unreasonably been compared with other schemes funded by the taxpayer—teachers and civil servants come to mind—but the legislation governing those is laid out following a set form in previous legislation. If the Minister wants to set up this scheme in such a way, why not say so here?
	Finally, on subsection (5), the Minister seems again to be saying in paragraph (a) that he will do something but then ensuring in paragraph (b) that he does not actually have to do it. The memorandum makes it clear that this subsection is to cover the contracted-out element of the Royal Mail pension scheme. Because of the unusual nature of the scheme, it needs to be brought specifically under Part 3 of the Pension Schemes Act 1993. Certain tweaks are known about, but instead of giving us a little more legislative certainty, we are to give the Minister the power to establish a scheme about which very little, or almost nothing, is known.
	The noble Lord, Lord Clarke, has tabled some very specific amendments in the following group, setting out an alternative way forward for handling the transferred RMPP liabilities. Without wishing to anticipate that debate, will the Minister, in answering my questions, give the Committee rather more detail about the scheme that he envisages and explain why so little detail has been given? I beg to move.

Lord Colwyn: If this amendment were to be agreed, I would be unable to call Amendments 43 to 45 because of pre-emption.

Lord McKenzie of Luton: I shall try to help the noble Lord, Lord Skelmersdale, to understand the detail of what is proposed here. The intention of Clause 16(3) is to make clear the powers of the Secretary of State in making orders to establish the new public sector scheme and for its operation. It enables the new scheme to include: provision for the increase of benefits under the new scheme, as would be required to match the indexation of benefits currently provided for under the RMPP, and the revaluation of deferred benefits. The noble Lord will understand that salary increases in excess of indexation will fall to be the responsibility of the RMPP, even if they refer to past accrued service. The provisions also include flexibility in the treatment of members who have deferred entitlements in the government-backed scheme but are still employed by Royal Mail, as might be required if a member sought to take early retirement on grounds of ill-health. That is why the clause enables a potentially different treatment between active and deferred members. They also include provision for payment of transfer values, as would be required for members who wish to transfer out their accrued benefits to another pension scheme.
	These provisions for the new scheme are important to ensure that the new scheme can provide benefits which compare with members' entitlements under the existing Royal Mail pension plan and therefore meet the intention of ensuring that members with benefits in the new scheme are no worse off. These provisions will be reflected in the rules of the new scheme, which will be set out in secondary legislation.
	We believe that this clause is necessary to ensure that the Government can meet their obligations under Clause 19(2) to ensure that members are no worse off in relation to their pension provision. The deletion of these powers would leave the Government without a firm legal basis to provide such benefits. I hope that that has clarified what Clause 16(3) is meant to achieve.
	On Amendment 45A, the effect of Clause 16(4) is to make the scheme capable of being treated as an occupational pension scheme for the purposes of the relevant legislation. These purposes will be set out in secondary legislation. As the noble Lord recognised, such treatment would put the new scheme in an analogous position to other public service schemes, which are occupational pension schemes. For pay-as-you-go schemes, some of the requirements that apply to other occupational schemes, such as those relating to investment, would not be relevant. But there are others, such as those relating to the provision of information to members and dispute-resolution procedures, which will be relevant, and where the Government expect them to be applied by order to the new public service scheme created under Clause 16. I am sure that noble Lords will agree that these safeguards under general pensions legislation are important for members. That is why we have that formulation for Clause 16(4). One has to identify which bits of those provisions are relevant and which are not. Clearly, those relating to investment are not relevant because this is an unfunded scheme.
	On Amendment 47, subsection (5) provides for the designation of the new public scheme as a salary-related contracted-out scheme. The Royal Mail pension plan is currently contracted out from the state second pension. But because the new scheme is not established by an employer for its employees, it would not normally be issued with a contracting-out certificate by HMRC. If the new scheme was not contracted out, the effect would be to restrict the transfer of contracted-out benefits between the RMPP and the new scheme. It would also prevent transfers between the new scheme and other contracted-out schemes, as would be required if a member of the new scheme wished to transfer their accrued benefits to another scheme. The treatment of the new scheme as a contracted-out scheme therefore allows for a seamless transfer of total accrued rights, including contracted-out rights, from the RMPP to the new scheme.
	The noble Lord specifically asked why we did not include indexation in the Bill. The indexation of benefits will reflect provisions in the RMPP rules and needs to be specified, together with other rules in the new scheme, in secondary legislation. In undertaking that, we will consult with the trustees. In the light of this explanation regarding the effect of these measures, I hope that the noble Lord, Lord Skelmersdale, is satisfied and will withdraw the amendment.

Lord Skelmersdale: I am very grateful to the Minister for that extremely helpful explanation. Indexation is in part governed by law, is it not? Did we not debate a pensions order only the other day in Grand Committee on exactly that basis? Is the Minister suggesting that the Secretary of State, in consultation with the trustees, will exercise his undoubted power to go over and above the indexation if he wants? I suspect that it is extremely unlikely.

Lord McKenzie of Luton: The important point here is what has to be provided in respect of accrued rights in the new scheme. That will effectively be done by treating people as "deferreds" on 16 December 2008 and taking account of their salaries at that date and the accrued service to that date while recognising that, going forward, that will be uprated by inflation. As for whether the overall scheme should deal with increases in pensions above that rate, that would be a matter for the existing scheme. It would be a judgment that the trustees and the employer of the existing scheme would have to make. That is not being dealt with by this provision. This is dealing with the accrued rights, the consequences for "deferreds" and future pensions. The new scheme will protect the salary link only to the extent of inflation. Anything above that would be for the existing scheme and would be a matter to be determined by the trustees and the employer in the normal course of events.

Lord Skelmersdale: I think that I understand that. However, at vesting day, for want of a better expression, there will be both deferred members and existing members whose pension payment is already being made. I am therefore slightly confused by the Minister's reference solely to treating everybody as deferred pensioners. However, I shall look at his words very carefully.

Lord McKenzie of Luton: I am sorry. I hope that the noble Lord will give me the chance to explain. Certainly for existing pensioners, their rights have already accrued and are set out in their entitlements. As I said, those will simply become payable from the new scheme rather than from the existing scheme. I referred to those in current employment who have accrued rights and who will likely gain future rights as well by virtue of their continuing employment. I am sorry if I did not make that clear.

Lord Skelmersdale: Clearly, I misunderstood. We will shortly have an amendment about the recipient when the pensions of the current deferred members come to be paid, all coming on the same cheque from a source somewhere or other. We will debate that in due course. For the moment, I beg leave to withdraw the amendment.

Amendment 42 withdrawn.
	Amendment 43
	 Moved by Lord Clarke of Hampstead
	43: Clause 16, page 8, line 26, leave out "and"

Lord Clarke of Hampstead: The three amendments in this group are obviously linked, and lead to the final one, which is to add something to the end of line 27. I shall skirt round the fact that the first amendment simply leaves out "and" and the second amendment inserts "and". The main amendment is to insert proposed new paragraph (d), which I thought would have been dealt with previously when we discussed additional voluntary contributions. In fact, I was surprised when it did not appear in the group with Amendment 39.
	The amendment seeks to,
	"include provision for the payment of additional voluntary contributions by members in pensionable service under the RMPP for the purpose of acquiring additional periods of pensionable service".
	This does not require me to rehearse all that I said when we discussed AVCs. However, I make the point again that AVCs, properly explained and properly marketed—if that is the right word—can be of great benefit to people who might end their working life with a not overly generous pension scheme. Even under the new public scheme, the benefits and structure will probably be the same. It is a long time since we had the Principal Civil Service Pension Scheme as a non-contributory scheme for post office workers, but here we are. We have another chance to put in something about additional voluntary contributions. I beg to move.

Baroness Turner of Camden: I support my noble friend, perhaps for a reason that he has not mentioned. It seems to me that this would be a very good provision in relation to people who have what we might call a chequered work pattern. That may very well apply in the case of many women who take time out of work to undertake caring and other family responsibilities.
	It is true that when we discussed the state pension some time ago, as my noble friend Lord McKenzie will recall, we introduced a rather similar amendment as far as women and the state pension was concerned. There was great support for the amendment, which was to enable women to pay extra to purchase pensions for the period when they had not been in the workforce. This would have the same effect. Therefore, for the reasons indicated by my noble friend and for the situations in regard to people who will have a chequered work pattern and will not have a continuous working life, the amendment would enable people to purchase extra years, so to speak, and to build up their pension so that it was an adequate amount when they came to take retirement. For those reasons, I support the amendment.

Lord McKenzie of Luton: I thank my noble friends for moving and speaking to the amendment. I think that it was originally grouped with Amendment 39, which we discussed earlier. It is a pity that it was degrouped, because at least if they were together there would have been some good news in our response to my noble friend; maybe that will presage what I am about to say. However, I agree with the thrust of the comments that have been made about the opportunity for people to contribute to AVCs and therefore enhance their pension provision.
	As we discussed in relation to Amendment 39, which was also proposed by my noble friend Lord Clarke, members of the RMPP have been able to make additional voluntary contributions to the RMPP, which will provide them with a top-up to the pension that they will receive on retirement, including through the purchase of additional years of service. The Government's intention is that accrued rights in respect of AVCs related to the purchase of added years accrued up to the qualifying time can be transferred to the Government. We are in discussions with the trustees concerning the practical arrangements for effecting such a transfer.
	I understand that particular concerns have been raised in relation to members who, as at the qualifying time of 16 December 2008, were still making contributions in respect of an existing AVC contract for the purchase of added years. I assure noble Lords that, for members in that position, their contracts in respect of AVCs are not changed by the Government's proposals. I think that there was a concern that if they were broken and people had to contract again, given that they were older when they did that, the terms would be less favourable. In other words, they will be able to continue contributions under their existing contracts on the same basis after the qualifying time as they did immediately before. All that is changing is that rights that they had accrued under that contract prior to the qualifying time will be transferred to the Government together with their qualifying accrued rights in respect of their core scheme benefits. The rights that they accrue under the contract after the qualifying time will remain with the RMPP, as at present. I hope that this clarification is helpful in explaining why Amendments 43 to 45 are not required.
	More generally, the amendments would provide all members of the new government scheme with the opportunity to accrue additional rights under that scheme, in addition to the qualifying accrued rights transferred from the RMPP. The Government cannot support this outcome. The new government scheme will, exclusively, contain historic liabilities incurred before the qualifying time. To safeguard the interests of taxpayers, while also providing certainty to scheme members, there must be a clear cut-off between the liabilities in the new public service scheme and those in the RMPP. Because the public service scheme will have no members building up further service, it will not include provisions normally associated with the accrual of new rights in the scheme, either through normal service or through additional voluntary contributions.
	Including the provision in respect of additional voluntary contributions proposed by the amendment would add to the complexity of the administration of the scheme, and therefore the costs to taxpayers, duplicating the existing provisions in the RMPP—which the Government are not proposing to change—potentially creating confusion for scheme members and potentially adding to the costs and risks carried by taxpayers in the long term. I stress that the fear was that if people's accrued rights in respect of AVCs transferred to the Government they would have to start a new contract to continue building rights, and that would be a more expensive option for them. My advice is that that is not necessary and that if they have contracts they can continue with them. Part in respect of accrued rights will go to the government scheme and part will remain with the RMPP. I do not think that there is anything proposed in relation to the RMPP, although that is a matter for trustees and the sponsoring employer going forward, which would prevent people contracting anew in that scheme for AVCs going forward. I hope that assurance will enable my noble friend to withdraw his amendment.

Lord Clarke of Hampstead: My noble friend is right that it was not as good news as on the previous amendment. I was rejoicing in the fact that for once I had agreement from the Secretary of State, but that seems now to have got a little muddy. I know that it was not intentional, and I have already paid tribute to the expertise of my noble friend Lord McKenzie and to his grasp of these matters. I will need to look at what has been said, together with what was said earlier about additional voluntary contributions. I will probably come back with something more succinct and perhaps more acceptable to the Government.

Lord McKenzie of Luton: I am very happy to meet to talk through the specifics of this, because I think that what my noble friend wants to achieve effectively can be achieved under the arrangements that are proposed. Maybe we need to have a get-together to go through the detail over a cup of tea—

Lord Hoyle: Or something stronger.

Lord McKenzie of Luton: Or something stronger, indeed. It depends who is paying.

Lord Clarke of Hampstead: How could anyone resist such an invitation? When my noble friend talks about meeting to discuss things, it gives me a chance to say something. On the previous amendment, a dear friend opposite, the noble Lord, Lord Skelmersdale, said something about the brief that I received from the union. Other than getting some advice on some of the technical stuff about pensions, I do not get a brief; I wish I did. I wish that I could sit here and readily put my hands on briefs that somebody had prepared. I would like it on the record that I am working mostly on my own, but that some good friends have helped me with pensions technicalities.
	I will think carefully about sitting down for tea. If it was with the other fellow, I would probably say I would bring a long spoon, but that would be cheeky. For the moment, I beg leave to withdraw the amendment.
	Amendment 43 withdrawn
	Amendments 44 to 45A not moved.
	Amendment 46
	 Moved by Lord Clarke of Hampstead
	46: Clause 16, page 8, line 28, at beginning insert "Subject to subsections (7A) to (9),"

Lord Clarke of Hampstead: I have tabled Amendments 46, 49 and 71. I prepared a paper at length on Sunday that referred to Amendment 50, but that comes later: it seems to have jumped from the earlier group.
	Amendment 46 suggests that the subsection should start with,
	"Subject to subsections (7A) to (9)".
	Amendment 49 suggests the replacing of subsection (7) with subsection (7A). It is necessary to spell these things out, because it is nice to get them on the record. I know that they will appear because of the system, but I am determined to get them out now. Proposed new subsection (7A) states:
	"If an order is made under section 20(1)(c), the fund established shall be established under trust and vested in a trustee for the new public sector scheme; and the scheme and trustee shall comply with the following sections of the Pensions Act 1955 (c. 26)—
	(a) section 34 (power of investment and delegation),
	(b) section 35 (investment principles)
	(c) section 36 (choosing investments)
	(d) section 36A (restriction on borrowing by trustees)
	(e) section 39 (exercise of powers by member trustees)
	(f) section 41 (provision of documents to members)
	(g) section 47 (appointment of professional advisers)
	(h) section 49 (other responsibilities of trustees, employers etc), and
	(i) section 50 (requirement for dispute resolution arrangements).
	(8) For the purposes of the provisions referred to in subsection (7A), the Secretary of State shall be deemed to be the employer.
	(9) If an order is made under section 20(1)(a) or (b)—
	(a) the new public scheme shall be administered by a company limited by guarantee,
	(b) at least one third of the directors of the company shall be nominated by qualifying members of the RMPP in accordance with requirements prescribed in the order, and
	(c) the company shall have power to administer the scheme, to appoint advisers and to delegate functions exercisable by it in accordance with requirements prescribed in the order".
	This amendment is comprehensive. By specifying the sections of the Pensions Act, it avoids any doubt and ensures that the Bill is in line with the requirements of the 1995 Act.
	Amendment 71 would delete paragraph (a). I am trying to be careful about saying things that might hurt people.
	Members with qualifying accrued rights that are transferred to the new public scheme will have no direct relationship with the Secretary of State: their rights will be enforceable against the new public scheme. The new public scheme might be funded or unfunded. There is nothing in the Bill to say that it could not be wound up. Amendment 50 makes explicit what seems to be assumed. Amendment 71 seeks to delete paragraph (a). I hope that the Minister has understood that: I took advice on the amendment and I have read out what I was given. I beg to move.

Lord Skelmersdale: The amendment is indeed comprehensive. I congratulate the noble Lord, Lord Clarke, on neatly doing what Ministers claimed could not be done. He has given a clear picture of the scheme, linked it to existing legislation and clarified where the two do not match. The question is whether the new scheme should be operated in this way. Clearly, it ring-fences the assets and runs as a company, with the deficit made up from government funding as needed. This would be an unlimited drip-feeding exercise. It is the sort of amendment that we sometimes get from the Liberal Democrat Benches. It would be very expensive as the Government would have to extend the guarantee and would get no assets from the existing pension fund. That is why, as I said earlier, I do not go along with a trust scheme as proposed by the noble Lord.

Lord McKenzie of Luton: These amendments give rise to a number of issues concerning the detail of the Government's proposals. The first issues that I will clarify are the envisaged arrangements for the transfer of assets under Clause 20, and in particular subsection (1) of that clause, which contains provisions for where the assets will be transferred. The Government intend any gilts and cash transferred to go to the Treasury and the Consolidated Fund respectively. The other assets will go to a fund established by the Secretary of State and will be sold over a number of years, with proceeds going to the Consolidated Fund.
	I emphasise that the fund established under Clause 20 is solely for the purpose of holding assets transferred from the RMPP prior to their disposal. In respect of the qualifying accrued rights transferred to the Government, the pensions due to members will be paid by the new public service scheme and funded from taxation. The new scheme will not operate on a funded basis.
	I will touch on issues related to a funded model. It has been suggested that it would be better for the new scheme to operate on a funded basis, rather than for the Government to assume direct liability for the payment of benefits. We have examined this carefully. Our analysis, set out in the impact assessment, demonstrates that the funded model would involve investment risks that could add billions of pounds to the final cost to the taxpayer. For example, if investment returns were 1 per cent lower than forecast by the trustees at the last full valuation of the scheme, an additional £6 billion would be added to size of the funding deficit falling to the Government—a doubling of the deficit's size. The funded option would also be the most expensive to run, not least in terms of investment management costs, where the Government's proposed approach would in the long term result in significant savings when compared to the £30 million currently paid by the scheme each year.
	The general question of investment risk is not just an issue for the Government. Noble Lords will be aware that the issue of the appropriate level of investment risk is also a matter of debate for company-sponsored defined-benefit schemes. For them, the question is one for trustees and sponsoring employers. In respect of the RMPP liabilities, it is entirely legitimate for the Government to take the view that they should not bear investment risk. This conclusion underpins other public service schemes; that is why it applies here.
	I turn to the detail of the amendments. As I explained, the intention is that any gilts and cash transferred would go to the Treasury and the Consolidated Fund respectively, with other assets going to a fund established by the Secretary of State and to be sold over a number of years. The option under Clause 20(1)(a) for a transfer of the assets to the Secretary of State would allow for the transfer of any cash to the Secretary of State, who would then pay it into the Consolidated Fund. It is also a contingency measure, should the fund envisaged under Clause 20(1)(c) not have been established by the time the transfer of assets is required to take place. The question of the destination of the assets transferred under Clause 20 is therefore not a matter of policy choice between the options under subsection (1) of that clause, but a question of the particular characteristics of the assets and the constraints they impose on how the assets can be held.
	In practical terms, this means that at least two options under Clause 20(1) will be required. It is not an either/or choice, as implied by the amendment. That would frustrate what I understand to be the purpose of Amendment 49, and make it unworkable. Nevertheless, I should briefly set out the Government's position on the substantive issues arising from the detailed proposals. The first concerns whether the general requirements under pensions legislation will apply to the new public service scheme. The effect of the provision under subsection (4) of Clause 16 is that the scheme will be capable of being treated as an occupational pension scheme, as we have discussed, for the purposes of the relevant legislation. Such treatment would put the new scheme in an analogous position to other public service schemes, which are occupational pension schemes. For "pay as you go" schemes, clearly certain requirements, such as those relating to investment that would apply to occupational schemes established on a trust-based, funded model, would not be relevant. But other requirements, such as those relating to the provision of information to members and dispute resolution procedures and those where the Government expect them to apply to the new public service scheme created under Clause 16, will be relevant.
	The second substantive issue raised by Amendment 49 is the administration of the new scheme. Subsection (7) provides for that to be delegated by the Secretary of State. The Government are in discussion with the trustees on the future administration arrangements for the new scheme and on how these might best be co-ordinated with those of the company-backed scheme with which members are familiar. As the process of consultation with the trustees has not yet been concluded, no final decision has been made on administrative options, but these could include, for example, initially contracting administration of the new scheme directly to the existing RMPP administrators.
	In this respect, the Government are well aware of the importance of close co-ordination with the arrangements for the existing scheme and for continuity for scheme members. They are also aware of the importance of a responsible administration of the scheme that is effective in responding to members' queries. The proposal in Amendment 49 to impose a particular administrative structure would, in the Government's view, be unhelpful in achieving these outcomes. It would raise additional questions regarding co-ordination with the existing RMPP administration. By forcing a transition away from the existing structure, the amendment would increase risks to members.
	I hope that I have dealt with the points raised by the amendments. I should stress that the fund envisaged by Clause 20 is not a funded pension scheme; it is simply a mechanism by which the assets that would be transferred to the Government under these arrangements are held, managed and disposed of in due course, and the proceeds will go into the Consolidated Fund. In light of my explanation on the issues raised by the amendments, I hope that my noble friend will consider withdrawing his amendment.

Lord Clarke of Hampstead: I thank my noble friend for that clear explanation, but the amendment is a direct attempt to get a trust-based scheme. That is fairly clear and there is no duplicity. As I tried to say in a garbled way at the beginning, there are some benefits to having such a scheme. It would impose an obligation on the scheme to appoint member-nominated trustees. It would observe the same investment obligations of any trust-based scheme. Member trustees should be able to act as trustees, even if they have a potential conflict of interest. I do not wish to fog this issue; this is a deliberate attempt to try to get the new scheme to be trust-based. It is as simple as that. Obviously, I have listened carefully and I shall read every word that has been said.

Lord McKenzie of Luton: Perhaps I did not do justice to the thrust of my noble friend's points; I, too, shall look at the record and take note.

Lord Clarke of Hampstead: This is a very nice atmosphere in which to be discussing these matters. Unanimity and friendship are breaking out all over. Seriously, I am indebted to the Minister for that last remark. I shall probably take advice on this issue and, no doubt, return to it at a later stage. In the mean time, I beg leave to withdraw the amendment.
	Amendment 46 withdrawn.
	Amendment 47 not moved.
	Amendment 48
	 Moved by Lord Skelmersdale
	48: Clause 16, page 8, line 36, at end insert "to 16 December 2008 or later"

Lord Skelmersdale: This amendment is grouped with Amendments 60 and 62, which are all about retrospectivity. The amendments are clear enough; they seek to limit the retrospective nature of these powers to the date that the Government have indicated that they hope will become the basis for any transfer. Of course, the actual date has not been set in stone. We established that in earlier debates.
	The memorandum to the DPRRC also makes it clear that the Government envisage using retrospective power for a few different purposes, such as if future legislation requires some retrospective changes. I am sure that quite a good case could be made for having some retrospective powers in these clauses. However, this clause, because it is based on precedent legislation, could be extremely specific. Once again, a perfectly unexceptional power has been given the widest possible scope. Will the Minister not consider the value of putting a few more safeguards on these powers, or, at the very least, explain why they have such a wide effect. I beg to move.

Lord McKenzie of Luton: These amendments relate to the provision for orders made under Clauses 16, 17, and 18 to have retrospective effect. The provision for retrospectivity in relation to orders made under those clauses is an important protection for scheme members. It is also necessary to ensure effective co-ordination of the proposals in respect of pensions with the Government's other proposals in respect of partnership. Perhaps I may deal with the latter point first.
	The Government have made it clear that their proposals on pensions will be implemented only if a partnership agreement is concluded. It is also the case that a partnership agreement can be concluded only if the historic pension liabilities are addressed through the measures set out in the Bill. Both are further dependent on state aid clearance being obtained from the European Commission, the date of which is uncertain. In practical terms, these dependencies mean that implementation of the measures under the Bill will require a high degree of co-ordination. A change to any one factor could affect the others. The Bill must provide for these dependencies to be managed adequately; otherwise its whole purpose risks being defeated.
	It is also the case that any prospective partner will require certainty as to the date at which the pensions measures will come into force so that there is no doubt about the level of risk that is being assumed. In addition, members of the RMPP will not welcome uncertainty as to how they will be affected, and the point at which their qualifying accrued rights will formally transfer to the new government-backed scheme.
	Ensuring the required co-ordination between pensions, partnership and state aid clearance, while also providing certainty for members and any prospective partner, presents a practical challenge because of a number of factors that are outside the Government's control. In particular, an extended timescale for state aid approval, or additional time required for consultation with the trustees on the detailed regulations, might delay the date at which relevant statutory instruments can be laid. Furthermore, in respect of a number of the proposed measures—including, for example, the establishment of the new scheme—the period required for implementation could potentially be lengthy.
	For these reasons, it is essential to provide flexibility to allow for orders made under Clauses 16, 17, and 18 to have retrospective effect. I think that we are agreed on that. In the absence of flexibility, there would be an increased risk that factors outside the Government's control in relation to pensions could leave RMPP members in a position of uncertainty and act as an obstacle to partnership, delaying the vital modernisation of Royal Mail that is urgently required to protect the universal postal service.
	I turn to the amendments. Limiting in the Bill the date at which provisions can have effect to a date later than 16December 2008 would have no positive practical effect and, indeed, could adversely affect the position of members of the new government scheme going forward. The Government have made it clear that they propose that 16 December should be the key cut-off point for the qualifying accrued rights that should be transferred from the RMPP to the new government scheme. In accordance with this policy, most of the provisions made under these clauses could not take effect before that date, because the qualifying accrued rights would not have fully accrued at that point. Going forward, however, it is common for pension schemes, including the RMPP, to have a power enabling retrospective amendment of scheme rules. This is required in order to comply with legislation or court rulings that also have retrospective effect. Placing an artificial limit on the scope of retrospective implementation of orders made under Clause 16 could prevent the new public service scheme complying with such changes and thereby adversely affect the position of members.
	In the light of what I have said in explaining the purpose and importance of the orders under Clauses 16, 17, and 18 being able to have retrospective effect, I hope that the noble Lord, Lord Skelmersdale, will not press his amendment.

Lord Skelmersdale: I think that the best way I can sum up that response is that it is a stout defence which requires study. I beg leave to withdraw the amendment.
	Amendment 48 withdrawn.
	Amendment 49 not moved.
	House resumed. Committee to begin again not before 8.31 pm.

Access to Justice Act 1999 (Destination of Appeals) (Family Proceedings) Order 2009

Copy of the Order
	7th Report from JCSI

Motion to Approve

Moved By Lord Bach
	That the draft order laid before the House on 25 February be approved.
	Relevant Document:7th Report from the Joint Committee on Statutory Instruments.

Lord Bach: My Lords, I beg to move that the draft Access To Justice Act 1999 (Destination of Appeals) (Family Proceedings) Order 2009 be approved.
	Subject to the House's approval, this statutory instrument will apply to appeals from decisions of magistrates' courts' family proceedings courts, known as FPCs. The proceedings affected are those which, by virtue of Section 65 of the Magistrates' Courts Act 1980, are or may be treated as family proceedings for the purposes of that Act and proceedings under the Child Support Act 1991.
	This statutory instrument will change the current destination of appeals from decisions of FPCs by providing that appeals from FPCs shall lie to a county court instead of to the High Court. It will also disapply appeals by way of case stated from family proceedings to provide a single process of appeal from decisions of FPCs.
	There are two main objectives of this reform. The first is to clarify and simplify the appeals process by removing the different processes to provide a single process of appeal from decisions of FPCs. This would make the appeal procedure from FPCs more user-friendly and easier to understand. The second objective is to optimise the use of available judicial resources by ensuring that, where appropriate, cases are determined at the lowest most appropriate level of the court system. This would enable the High Court to focus on matters that genuinely require its expertise.
	The current appeals processes from FPCs are complex, having been developed piecemeal over the years in a number of different statutes. First, there are different statutory provisions for different types of proceedings giving rights of appeal from decisions of FPCs. These are referred to in Articles 2 and 3 and 6 to 9 of the instrument. There are different ways of starting these appeals. These include filing a notice of appeal or lodging a notice of motion. Secondly, where there are no statutory rights of appeal against a decision of a family proceedings court, the means of challenging that court's decision, other than by judicial review, is by an application to have a case stated for the opinion of the High Court, which requires a party to make an application to the FPC asking the justices to state their case for the opinion of the High Court.
	In practice, these different processes can be complicated and difficult to understand, particularly to the litigant in person. For example, a family proceedings court makes a residence order in favour of a mother so that the child lives with her with contact provision in order that the father can see the child every Saturday. At the same time, the FPC makes a maintenance order compelling the father to pay maintenance to the mother. The father of the child decides to appeal against the FPC's decisions about the amount of contact with the child and the level of maintenance to the mother. To appeal against the contact order, the father would have to file a notice of appeal in the family proceedings court in accordance with Section 94 of the Children Act 1989. However, to appeal against the maintenance order, the father would have to lodge a notice of motion under Section 29 of the Domestic Proceedings and Magistrates' Courts Act 1978.
	In the mean time, in my example, arrears of child support maintenance have mounted, which result in the magistrates' court making a liability order. The father wants to challenge that liability order by appealing against it. The means of challenging it is for the father to make an application to have a case stated for the opinion of the High Court. As I hope the House will see from this example, the father would have exhausted three different processes to appeal against three decisions made by the same court in related proceedings concerning the same family. We argue that this instrument will simplify this complex procedure by providing a single process of appeal.
	The Government are committed to delivering fair and simple routes of access to justice by, among other things, using available judicial resources to best effect in order to provide effective, efficient and speedy civil and family court processes and procedures. The purpose, of course, is to promote public confidence in our court system and provide user-friendly court processes. This was the principle that underpinned our policy underlying two successful public consultations. The first, focusing judicial resources appropriately—the right judge for the right case—was a joint government and judicial initiative aimed at reducing the workload of the High Court Bench to ensure that cases are determined at the lowest most appropriate level of the court system commensurate with complexity.
	Part of those proposals were implemented in November last year with the introduction of the family law Allocation and Transfer of Proceedings Order 2008, which sets out criteria for starting family proceedings at each level of court. One of the benefits of that allocation order is that more family cases will be started in the family proceedings courts and transferred from the county courts to the family proceedings courts. This would pave the way for county courts to have more capacity to hear more cases currently heard by the High Court Bench, including appeals from the decisions of family proceedings courts, which are currently heard by the High Court, and which this statutory instrument seeks to achieve. Recent statistics indicate that appeals from the family proceedings courts to the High Court are low. In 2008, a total of only 45 appeals were made. However, this figure does not include appeals issued in the district registries but the Government consider that the provisions of this statutory instrument are unlikely to lead to a significant increase in the workload of the county courts.
	The second public consultation which underpins this statutory instrument is the 2006 family procedure rules consultation. This consultation sought public views on proposals to introduce a single form of appeal notice, reroute appeals from FPCs from the High Court to the county court and abolish case stated appeals in family proceedings in order to provide an effective operation of the family justice system. As with the public consultation that I have just mentioned, a clear majority of respondents supported the policy proposals underlying the appeals provisions of the 2006 family procedure rules consultation. Comments provided by respondents formed the basis of the initial draft of this statutory instrument. The Government consulted further with more than 200 stakeholders, including the judiciary, legal professional bodies, the Family Procedure Rule Committee, consumer and representation bodies, charity organisations and other government departments with an interest in the proposals. That consultation sought views on the scope, the practicalities and the aims of this instrument. A majority of respondents who chose to comment supported the provisions of this statutory instrument, and some provided helpful comments which informed the final draft.
	The changes brought by this statutory instrument support an effective and efficient appeals process in the family justice system. It will clarify and simplify the appeals process, making it more user-friendly for court users. It will make more efficient use of available judicial resources by reducing pressures on the High Court Bench to enable it to concentrate on more complex cases. We hope that these changes will contribute to our commitment to deliver fair and simple routes of access to justice. I therefore commend this instrument to your Lordships' House.

Lord Kingsland: My Lords, this order is, I understand, the second of two orders that seek, in the Minister's words, to simplify and rationalise procedures and appeals in family proceedings under Section 65 of the Magistrates' Courts Act 1980 and the Child Support Act 1991.
	The first order, the Allocation and Transfer of Proceedings Order 2008, changed the criteria for commencing family proceedings. As a consequence a greater number of family cases will be initiated in magistrates' courts instead of in the county courts, thereby, at least to some degree, freeing the latter to adopt the extra responsibilities bestowed on them by the order now before us.
	This order, in the words of its Explanatory Memorandum,
	"changes the current destination of appeals from decisions of magistrates' courts in so far as family and related proceedings are concerned, by providing that appeals shall lie to a county court instead of to the High Court".
	The aim is twofold: first, again in the words of the Explanatory Memorandum,
	"to make more efficient use of available judicial resources by re-routing appeals to a lower court so as to reduce pressure on the High Court bench and to clarify and simplify the appeals process by removing the different processes".
	I observe in passing that, admirable though the motive is to reduce the workload of the High Court Bench, that does not, in respect of the matters under review, appear unduly onerous. In 2008, as the Minister has already observed, the number of relevant appeals amounted to 45. Moreover the simplification of the appeals process is mainly a matter dealt with by the provisions of the first order and the work of the family proceedings rules committee, exercising its responsibilities under Section 40 of the Matrimonial and Family Proceedings Act 1984. A third motive is also cited, which is that the order will help to optimise the use of available judicial resources by ensuring that cases are determined at the lowest appropriate level of the court system. As a principle, that is unexceptionable. Whether that is achieved in practice in this order is a matter to which I now turn.
	As we have heard, there are two ways in which a decision can be appealed against in a magistrates' court with respect to these matters. First, where there exists a specific statutory right of appeal to the High Court; and, secondly, in the absence of such a right a decision can be challenged by an application to have a case stated for the opinion of the High Court under Section 111 of the Magistrates' Courts Act 1980.
	As regards the first category, the legislative manner in which the description "county court" is substituted for "High Court" is wholly appropriate. Were it not for Section 55(1) of the Access to Justice Act 1999, I would have had nothing more to say about it. Section 55(1) is side-headed "Second appeals". It states:
	"Where an appeal is made to a county court or the High Court in relation to any matter, and on hearing the appeal the court makes a decision in relation to that matter, no appeal may be made to the Court of Appeal from that decision unless the Court of Appeal considers that—
	(a) the appeal would raise an important point of principle or practice, or
	(b) there is some other compelling reason for the Court of Appeal to hear it
	(2) This section does not apply in relation to an appeal in a criminal cause or matter".
	This is a considerably stiffer test than the normal test that applies on an application to appeal to the Court of Appeal from a first instance matter, which is encapsulated in the question: does the appeal have a real prospect of success? The slope of the cliff face that the appellant confronts after an adverse decision in the county court—in which he found himself in consequence of an adverse family proceeding decision in a magistrates' court—will be steep. This has been well expressed by Lord Justice Brooke in the Court of Appeal in the case of Tanfern Ltd v Cameron-MacDonald. He said:
	"It will no longer be possible to pursue a second appeal to the Court of Appeal merely because the appeal is 'properly arguable' or 'because it has a real prospect of success' ... The new statutory provision is even tougher—the relevant point of principle or practice must be an important one—and it has effect even if the would-be appellant won in the lower court before losing in the appeal court".
	It follows that, with respect to the scope of this order, the combination of its terms together with the text of Section 55 of the Access to Justice Act 1999 make it impossible to be heard by a High Court judge and fairly close to impossible to be heard by the Court of Appeal. In these circumstances, can the Government really be confident that they have met the terms of their own test that cases should be determined at the lowest appropriate level of the court system? There must be a powerful argument for stating that the scale of the barrier to advancing family proceedings cases beyond county court level is inappropriately demanding.
	The new rules in the order with respect to stating a case from the magistrates' courts to the High Court pose different problems. The mechanism that the Government have chosen to substitute the description "county court" to "High Court" is in Section 56(7) of the Access to Justice Act 1999. I hope that noble Lords will forgive me for turning to that Act to quote briefly from Section 56. Subsection (1) states:
	"The Lord Chancellor may by order provide that appeals which would otherwise lie to—
	(a) a county court,
	(b) the High Court, or
	(c) the Court of Appeal,
	shall lie instead to another of those courts, as specified in the order".
	Then, Section 56(7) states:
	"For the purposes of this section an application to have a case stated for the opinion of the High Court constitutes an appeal".
	On the basis of those two provisions, paragraph 3.6 of the Explanatory Memorandum comments:
	"By virtue of the new section 111A of the 1980 Act in article 4(3) of the New Order, an application to have a case stated under section 111 of the 1980 Act in relation to family proceedings will be replaced by a regular appeal to a county court on restricted grounds that the decision was wrong in law or in excess of jurisdiction. It is a county court which will decide whether or not the decision of the magistrates' court is wrong in law or in excess of jurisdiction. The two stage process which exists at the moment whereby an application is first made to the magistrates' court and then that court submits the document to the High Court will be replaced by one notice of appeal outlining the restricted grounds of appeal to a county court".
	It is clear from paragraph 3.37 of the Explanatory Memorandum that the Ministry of Justice is not entirely confident of its ground. It states:
	"The Ministry of Justice considers that the reference to an application to have a case stated in subsection (7) is to the whole case stated procedure and not only to the application to the magistrates' court".
	I respectfully submit to the department that its hesitation is understandable. On the plain words of Section 56(7), the narrower interpretation is, at least, equally plausible.
	The frailty of the department's approach is, moreover, amplified when one sets its interpretation in a broader context. The case stated procedure gives an applicant a direct route to the Divisional Court, which comprises a guaranteed hearing by two, sometimes three, judges of at least High Court rank. Section 56(7) does not just apply to family proceedings; it applies to all non-criminal matters. Can it really be the case that Parliament granted the Lord Chancellor the right to do away with a centuries' old jurisdiction, the exclusive right hitherto of the Court of King's Bench, by order?
	My view is further reinforced by paragraph 3.8 of the Explanatory Memorandum. The first sentence reads:
	"Appeals by way of case stated are an example of the supervisory jurisdiction of the High Court over inferior courts. A county court is an inferior court and it would therefore not be appropriate for an appeal to a county court to be by way of case stated".
	So the appeal to the county court would not, as a matter of constitutional principle, be by way of case stated. However, paragraph 3.8 continues:
	"As section 56 specifically permits appeals by way of case stated to be moved from the High Court to a county court, the view of the Ministry of Justice is that it would be a proper exercise of the section 56 power to provide that the application to have a case stated should be a regular appeal but on the restricted grounds referred to in the new section 111A of the 1980 Act in article 4(3) of the New Order".
	What does Section 111A of the 1980 Act in Article 4(3) of the new order state? At paragraph 2, it states:
	"Any person who was a party to any proceeding before the court, or is aggrieved by the order, determination or other proceeding of the court, may question the proceeding on the ground that it is wrong in law or is in excess of jurisdiction by appealing to a county court".
	So, in effect, we have a case stated procedure whose final arbiter is an inferior court. Is that not a contradiction in terms?
	I should add that the same hesitation applies to the government scheme under new Section 111A with respect to the degree of inaccessibility to the Court of Appeal by an appellant from a county court decision.
	I can comfort the Minister to this extent: we shall not be voting against the order. I recognise that the Lord Chancellor has consulted the senior judges and that wider consultations have been conducted with those with far more experience in family law matters than I. However, I earnestly hope that the department will consider the contents of the order again in the light of what I have said, if only to reassure itself that my fears are wholly imaginary.

Lord Goodhart: My Lords, I see the order as sensible. It removes unnecessary complication. As the Minister said, it is a matter likely to cause confusion when we have a system that involves an appeal to the High Court in some cases and what is in effect an appeal by way of case stated in others. It also seems to be reasonable to transfer appeals from the High Court to the county court. The noble Lord, Lord Kingsland, referred to Sections 55 and 56 of the Access to Justice Act. They are two sections that will come before your Lordships' House in business fixed for tomorrow, in which they are likely to be matters of some importance.
	In this case, I am prepared to accept that it is reasonable for appeals to be transferred to the county court. That reduces the pressure on the Bench, although that pressure seems not to be very great at present. It also has some practical advantages. For example, county courts are likely to reduce the distance of travel for parties and their lawyers and to reduce the costs. That is an important factor, particularly now that the Government have gone such a long way towards strangling civil legal aid.
	I note, as did the noble Lord, Lord Kingsland, paragraphs 3.7 and 3.8 of the Explanatory Memorandum. They raise possible legal doubts about the powers under Section 56 of the Access to Justice Act and the proposals under the order to convert the case stated into an ordinary appeal. I see no reason here to differ from the view of the Ministry of Justice, as expressed in the memorandum, that the process is legitimate. If it is not, that is a problem that the Government will have to face up to.
	The order makes minor but relatively useful changes, on balance. I am therefore prepared to accept it as it stands.

Lord Bach: My Lords, I am very grateful to both noble Lords for the care that they have taken to consider the order in detail. I am grateful for the unrestricted support from the noble Lord, Lord Goodhart, and for the final comment of the noble Lord, Lord Kingsland, that he does not intend to oppose the order today. As Shakespeare had it,
	"for this relief much thanks".
	I congratulate the noble Lord, Lord Kingsland, on a bravura performance in his analysis of this important order. Despite his concerns about two aspects—first, about second appeals, and, secondly, what he thinks he detects is a lack of confidence by the ministry in its analysis—the judiciary at the highest level do not share those concerns. He was good enough to make that point.

Lord Kingsland: My Lords, the noble Lord is quite right to say that a powerful reason for my not pressing this matter any further is the fact that the Lord Chancellor has consulted the senior members of the judiciary. However, one does not know what concerns they raised with him before they signed these matters off. Some concerns may have been expressed—I am not asking the Minister to reveal the answer, even if he knows it; but because I have no knowledge of whether they were advanced, or if they were advanced how powerfully they were put, it would be quite improper of me within the conventions of this House to press the matter further.

Lord Bach: My Lords, I have no idea either. They may have taken a Goodhartian view of this issue rather than a Kingsland view.

Lord Kingsland: My Lords, that just demonstrates how much better established the noble Lord, Lord Goodhart, is in your Lordships' House than I am. He was furnished with the accolade "Goodhartian". I, by contrast, was not accorded "Kingslandian", but merely "Kingsland". The Minister's judgment is, however, wholly appropriate.

Lord Bach: My Lords, the noble Lord does not know how close I was to taking, or how dangerous I thought it might be if I were to take, the adjective any further.
	I could again go through what the Explanatory Memorandum says and point out, although not as clearly as the noble Lord, the logic of the ministry's position. We do not lack confidence in our judgment here—I must make that absolutely clear—and the noble Lord will not be surprised to hear that there will be no chance to look at this order again because it is due to come into force very shortly and, I understand, there will be practice directions from the President of the Family Division and the Lord Chief Justice very soon.
	However, we will see how this works, and the noble Lord can rest assured that if any injustice is done either in second appeals or in a case stated, we will reconsider the matter at some stage in the future. We need to give the order a chance. It simplifies the system. It also simplifies the case-stated system in that it is not necessary to get written reasons given by the magistrates, although they will be encouraged to give reasons in each case. Under the case-stated provisions across the law, as I understand it, magistrates could simply refuse to give reasons, and they might or might not be ordered by the High Court to give them.
	We are confident that this is a good move for family justice, and once again I commend the statutory instrument to the House.
	Motion agreed.
	Sitting suspended.

Postal Services Bill [HL]

Bill Main Page
	Copy of the Bill
	Explanatory Notes
	Amendments

Committee (2nd Day)(Continued)

Amendment 50
	 Moved by Lord Clarke of Hampstead
	50: Clause 16, page 8, line 40, at end insert—
	"( ) If a new public scheme is wound up, its liabilities shall be guaranteed by the Treasury."

Lord Clarke of Hampstead: I am grateful for the dinner break, which gave me a chance to sort out some of these papers. Amendment 50 proposes a guarantee, which would mean an obligation made by the state to underwrite the new public scheme if it is wound up. In the case of an ordinary private sector scheme that is wound up, members have a right to their pension benefits, which would be enforceable against the trustees and not the employer. The trustees have a right to make the employer pay whatever is needed to fund those benefits.
	This situation is similar. Under Clause 16(2), members' accrued rights are transferred to a "new public scheme", which will be run by the Secretary of State or his delegates. It transfers the right to a pension to the scheme and not to the Government. Members' rights are enforceable against the scheme and not the Secretary of State. The new public scheme might be funded or unfunded. Either way, nothing in the Bill says that it could not be wound up. This clause makes explicit what seems to be assumed. If the scheme is wound up, it will not be wound up in deficit. If a segment of the Royal Mail went bust or insolvent, what would be the position of other segments? Would they stand alone or would they be dependent on each other? What happens to the pensions of people in that segment?
	Is Amendment 55 mine as well? I think it is. Oh, no, it is not. I beg to move.

Lord Skelmersdale: I am afraid that we on this side, the very few, cannot agree with either of the amendments tabled by the noble Lord, Lord Clarke. We do not support the extension of a full government guarantee for any future failure of the ongoing RMPP. Instead, we hope that the reorganisation and part-privatisation of the company in Part 1 would ensure that such a guarantee would never be needed. Indeed, as I said earlier, if that eventuality ever came to pass, we think that a new and separate piece of primary legislation would be needed and, on reflection, I believe that the noble Lord, Lord Clarke, would agree. However, the amendments give us the opportunity to probe exactly what guarantee the Government are offering to pensioners whose rights have been transferred over to the new public scheme.
	The Minister and indeed the Secretary of State have chosen not to set up a new scheme under the Superannuation Act 1972, which leaves the question of exactly what guarantees the new public pension scheme will have, so I go along with one of the questions asked by the noble Lord, Lord Clarke. Am I right in believing that the ongoing liabilities remaining in the RMPP will be subject to a guarantee from the Pension Protection Fund as any private sector DB pension scheme would be? The fund protects only 90 per cent of core pension rights. Do the Government intend to guarantee the new public scheme only up to that limit or will it be 100 per cent guaranteed? Will this be the only public sector pension scheme that could have recourse to the Pension Protection Fund, or does, for example, the United Kingdom Atomic Energy Authority scheme have the failsafe of the PPF? Moreover, are there any other schemes in the public arena which have that recourse?

Lord McKenzie of Luton: Some interesting issues have been raised. Perhaps I can say first to my noble friend Lord Clarke that Amendment 55 is grouped with this amendment and extends the proposition in respect of the guarantee not just to look at the new public scheme, but that:
	"If the RMPP or any section of the RMPP is wound up, its liabilities shall be guaranteed".
	I will address those issues, even if my noble friend did not actually touch on them. I shall deal specifically with his query about whether, if a section of the RMPP did go bust, it would affect other sections. The intention is that sections of the RMPP that the Government create are fully segregated so that there is no cross-subsidy or cross-fertilisation, as it were.
	I can also say up front to the noble Lord, Lord Skelmersdale, in regard to the Pension Protection Fund, that if the RMPP in its funded guise were to suffer circumstances where the employer had an insolvency event and therefore began to wind up an insolvent position, the PPF would kick in. But there is a big "if" about the insolvency of the employer because in those circumstances we would have to look separately at the Post Office and Royal Mail. The Government have said that they intend to take responsibility for members' historic rights accrued up to 16 December 2008, including the pension deficit currently estimated to be in the order of £6 billion. At the point of transfer of any liabilities and assets to the Government, the sections of the RMPP would be left with sufficient assets to cover their liabilities. Let me make it clear that the Government are not proposing to make any changes to individual pension entitlements for either past or future service, and decisions on future pensions provision will continue to remain with Royal Mail Group Ltd and Post Office Ltd. As such, it is right that responsibility for funding future service entitlement should remain with those two companies. The Government's proposals would facilitate a strategic partnership with Royal Mail, and both companies—Royal Mail Group Ltd and Post Office Ltd—would be in a much better position to support members who want to continue to build up pension benefits in the company-backed scheme. In the unlikely event of the insolvency of either sponsoring employer, as I have just said, members would be eligible for protection from the Pension Protection Fund. However, as the noble Lord, Lord Skelmersdale, noted, for pensioners in those circumstances the benefit would be 100 per cent on a PPF basis, which does not necessarily equate to a strict comparability with the benefits from the scheme for someone who has not yet reached normal retirement age at the date of the assessment. When payment is made it would be at 90 per cent, but with the detriment of the cap. As I have said, however, it would require the unlikely event of the insolvency of the sponsoring employer for that to happen.
	Amendment 50 would require the Treasury to meet any outstanding liabilities to the public service scheme were it to be wound up. Such provision would, however, be applicable only to a scheme operated on a funded basis, and that is not what the Government are proposing. As public service schemes operate on a pay-as-you-go basis, the liabilities that would be transferred to the new scheme are in effect already guaranteed by the Treasury because the Government are responsible for paying the benefits when they fall due. So what my noble friend is seeking is certainly met in practice in respect of the new scheme.
	Amendment 55 would go further and essentially provide a government guarantee to the whole of the RMPP, including any future service rights accrued after 16 December 2008. Under the amendment, if the company and trustees decided to wind up the scheme, the Government would have to meet any shortfall in funding. I should clarify that if the Government established a new section in the RMPP for qualifying accrued rights—the fallback option if a new scheme is not established—the liabilities in this section would already fall directly on the Government, who would meet the costs of paying the benefits as they fell due. So, in essence, that would equate to the situation if a separate scheme was set up.
	The guarantee arrangements of the proposed sections for employees of Royal Mail Group and Post Office Ltd could have a number of adverse effects. First, they would, in effect, make winding up much more likely to happen because of the undertaking that there would be no additional costs to the sponsoring employer. Secondly, and related to the first point, because the winding up is not contingent on Royal Mail's own insolvent liquidation, it would represent a significant and potentially unfair subsidy to Royal Mail and Post Office Ltd and the European Commission would be likely to view this as incompatible aid. Thirdly, it would result in the prospect of a further potentially significant burden on taxpayers for an indefinite period into the future. Ultimately, taxpayers would be underwriting the decisions taken by the trustees and the company with no influence over their actions. For these reasons the amendment is not appropriate.
	The Committee will be aware that the Government have to balance protecting the universal postal service, members of the pension scheme and the interests of taxpayers. For members, the RMPP will be left in a much better position than it is at present and we are not proposing any changes to individual pension entitlements. I hope that my noble friend will find a degree of comfort within that and feel able to withdraw his amendment.

Lord Clarke of Hampstead: I thank the noble Lord for his courtesy in referring to Amendment 55, which, because of my ineptitude or stupidity, I did not speak to in a meaningful way. I saw the links between the responsibility for any scheme that was wound up as being much the same and I used a bit of shorthand. If I had not had some good news from the House of Commons Business and Enterprise Select Committee earlier today, I would have given more time to making sure that the Committee had the benefit of my comments on Amendment 55. I am tempted to go over it again but I shall not do so because, when we come back on Report, we will have the chance to give these matters another airing.
	I was interested in the assurance about the segment that might go bust. As I understand it, the Secretary of State has one of the segments and one belongs to the privatised company and others. I am concerned about a private company having the same moral obligations that the Secretary of State would have by introducing this scheme. On the 90 per cent, is it right that the employer will be required to pay into that protection fund?

Lord McKenzie of Luton: Perhaps I may help my noble friend on two points. On the issue of the Secretary of State having a section of the RMPP fund, I stress that that is a contingency provision if it is not possible to set up in the time available a separate scheme, which is the objective we seek. It is only if that does not come about that a section of the RMPP for accrued rights would be the responsibility of the Government.
	The PPF would require a qualifying insolvency from the sponsoring employer before it kicked in. At the moment the PPF is funded partly by a levy on schemes, partly by the assets that it takes in from schemes and partly by the investment return that it gets on them. It is not directly funded by employers, although some employers top up the contributions that they make to schemes to enable the levy to be paid. I hope that helps my noble friend.

Lord Clarke of Hampstead: That is very helpful. Another consequence of a segment going bust is the fact that the Pension Protection Fund, as I understand it, would limit any increases to 2.5 per cent. If that is wrong, perhaps my noble friend will tell me. I am grateful for the information about how the Pension Protection Fund is funded. As I say, there is plenty of time for us to debate this at greater length at a different hour of the day on Report. In the mean time, I thank him again for his courtesy about Amendment 55 and look forward to reading what he has said and coming back. I beg leave to withdraw the amendment.
	Amendment 50 withdrawn.
	Clause 16 agreed.
	Amendment 50A
	 Moved by Lord Skelmersdale
	50A: After Clause 16, insert the following new Clause—
	"Trivial portability
	The Secretary of State may by order make provision for trivial qualifying accrued rights—
	(a) that would not otherwise be transferred by an order under section 16(2), to be transferred; or
	(c) that would otherwise be transferred by an order under section 16(2), not to be transferred."

Lord Skelmersdale: I have tabled this amendment to suggest a small aspect of the new public pension scheme and its relationship with the RMPP that would be of benefit to both. It would establish that any trivial liability relating to a member who remained in one scheme, while the huge bulk of their pension liability fell into the other scheme, could be carried across. That may seem to be a small suggestion and, given the quite enormous powers that these clauses give to the Secretary of State, I would be astonished to hear that it was not already possible under current drafting, but I thought I would make the case for this level of portability none the less.
	The administrative saving could be considerable. As the Minister knows, there are plenty of precedents for the use of both portability powers and the calculation of triviality, both of which we have discussed at various times in recent years. The latter could of course be specified in relation to the triviality limits set out in the Finance Act 2004. A trivial-portability provision would also have the advantage of reducing the number of people receiving their pension benefit from two sources.
	While we are on this group, will the Government give some indication of whether any thought is being given to how the new public pension scheme will pay out the benefit? Will there be any liaison with the RMPP about the timing of the arrival of the cheques? The ideal situation would be that each pensioner received their benefit from one source. I hope the Minister will be able to tell us that the Government intend to make it possible for the company handling the RMPP payments to handle the new pension scheme's payments as well.
	While I am on that subject, I wish the noble Lord, Lord Clarke, would stop referring to a "privatised company". It is nothing of the sort. It remains a public company. Outside money will be coming into it but very much at its head, under the proposed structure, are Her Majesty's Government, under whom comes Royal Mail Holdings plc. The only bit of the Post Office network that the Bill covers is Royal Mail Group Ltd, which is letter and parcel post, and Post Office Ltd—that is where the commercial relationship comes into play. There are three other firms within the group, including Royal Mail Estates Ltd, Royal Mail Investments Ltd and, as the noble Lord will know well, the fairly new General Logistics Systems firm. I am sure that the Minister will agree with me that under the Bill it is not, and never will be, a privatised company. I beg to move.

Lord McKenzie of Luton: I am happy to address the interesting point that the amendment raises in relation to the position of members of RMPP who retain small, or trivial, amounts of accrued benefit within the scheme after the transfer of their qualifying accrued rights to the new public service scheme.
	When a clear dividing line between the qualifying accrued rights that transfer to the new public service scheme is set, some members may be left with a relatively small amount of benefit in the RMPP. However, that does not outweigh the benefits of having a clear dividing point that provides certainty for scheme members and protection for taxpayers. The challenge is to ensure that any adverse effects can be adequately addressed.
	One of the principal concerns in relation to small benefit entitlements is the cost of administration. Following the transfer of liabilities to the new scheme, the administrative costs associated with payment of benefits to pensioners and deferred pensioners will fall entirely to the new public service scheme and not to Royal Mail. For individuals who were active members as at 16 December, the additional administrative cost in respect of the payment of benefits relating to their qualifying accrued rights will fall to the Government, not the RMPP. The Government's impact assessment estimated that the net increase in administrative costs, taking into account the savings to the RMPP, would not exceed £2 million per annum on an ongoing basis after implementation.
	The Government are determined to ensure that administrative arrangements are as efficient as possible, that unnecessary duplication is avoided, and that there is effective co-ordination where an individual member has accrued rights in both schemes—the very point that the noble Lord pressed. That principle applies as much to members with small accrued rights as to those whose accrued rights are much greater.
	We are in discussion with the RMPP trustees concerning how administration of the two schemes should best be co-ordinated. Although no final decisions have been made, the options include initially contracting administration of the new public scheme directly to the RMPP administrators—one could see the obvious benefits of that.
	The noble Lord's amendment has other effects with which the Government have some difficulty. It raises the prospect of members with small amounts of qualifying accrued rights being treated on a fundamentally different basis from others who do not fall into that category. The Government cannot support this difference of treatment or the basis for it. It would also raise significant uncertainties for members who may be affected.
	Equally problematic is the suggestion in the amendment that other trivial accrued benefits within the scheme could be included in the transfer order, even if they were accrued after the qualifying time; that is, the 16 December cut-off point that has been set by the Government. This undermines a key principle of the Government's proposals: that there should be a clear cut-off between the liabilities that transfer to the new public service scheme and the liabilities that remain with the RMPP. In so doing, it would increase the costs and risks that fall upon the taxpayer.
	For these reasons, the Government cannot support the noble Lord's amendment. In light of the assurances that I have been able to provide in respect of future administrative arrangements, which are key here, I hope that he will feel able to withdraw it.

Lord Skelmersdale: I think that it is the first time that I have heard the Minister say that this was an interesting idea—or at least words to that effect. I am delighted to hear that some thought is being given to the administration of payments. With a bit of luck, it will be resolved before the Bill completes its passage in another place. I hope that the Minister agrees with that ambition, even if it does not come to fruition.
	There is a small problem with those post office employees who were employed a year before the new DC scheme came into effect as a result of negotiations in April 2008. I note that the Minister said that my idea as enumerated in this amendment would rather complicate the issue. None the less, we might both reflect on the position of those people with very small amounts of benefits.

Lord McKenzie of Luton: I do not quite see the connection with the new DC scheme. The noble Lord is right that the current scheme is closed to new entrants but, if somebody is in the RMPP scheme, whether by a year before the new DC scheme or not, they obviously continue to accrue rights under that scheme, albeit that in terms of future service it may be on a different basis—on career average and, shortly, with a different normal retirement age. But I am struggling to understand its juxtaposition with the DC scheme.

Lord Skelmersdale: As I understand it, although I am perfectly willing to be corrected, when the agreement of April 2008 was set up, part of that agreement was that if you were already in the DC scheme, you would continue in the DC scheme. Sorry, I have got it the wrong way around. If you were on the DB scheme, I mean, you would continue on the DB scheme as long as your employment lasted. If, however, you were a new entrant, it would be a direct contribution, which is of course a different cup of tea. What I have been trying to talk about is small amounts of money accumulated under the DB scheme, which, in part, are the responsibility of the new government scheme and will then become, for the rest of the career, the responsibility of the Post Office scheme. I was trying to find a way in which to roll the two into one; that seems a perfectly sensible suggestion, even if the Minister does not think that it is practical. Perhaps we could both consider the matter further. In the mean time, I beg leave to withdraw the amendment.
	Amendment 50A withdrawn.
	Clause 17: Division of the RMPP into different sections
	Amendment 51
	 Moved by Lord Skelmersdale
	51: Clause 17, page 8, line 42, leave out subsection (1)

Lord Skelmersdale: My Amendment 51 is a probing amendment about the ongoing state of the RMPP. The noble Lord, Lord Clarke of Hampstead, who has Amendment 52 in the group, will probably be just as interested in the answer as I will be. Indeed, my amendment raises many of the same questions that his amendment does.
	As we have already discussed somewhat tangentially, the RMPP covers many different schemes and benefits. There is the ongoing DB scheme, the relatively recent DC scheme, and all the top-ups and AVCs available to both. There is also the senior executive pension plan, a DB scheme which the Government are leaving behind in the RMPP. After the reorganisation, there is a case to be made for expanding the number yet further. Since Post Office Limited will no longer be a subsidiary of the Royal Mail Group, it can become the sponsoring company to its employees, in a separate section to the Royal Mail employees pension scheme. Subsection (1) of Clause 17 certainly seems to prepare the way for something of that sort. I should be grateful for some clarification from the Minister on the Government's intentions. As I said on the previous amendment, there are some five totally separate entities within the group, and the Bill allows each to have its own sub-pension scheme.
	On the first day of Committee my noble friend raised some concerns about the ongoing relationship between Post Office Limited and the Royal Mail and many of these concerns are relevant to their pension arrangements too. Currently, I understand that it is perfectly normal to transfer between the Royal Mail Group and Post Office Limited as an employee—and, indeed, the other companies in the group. If the pensions for all these companies have been held in one pot, this is easy to accommodate, but how will the arrangements work after the re-organisation? If an employee is transferred between companies, will his pension be moved with him or will he be counted as a new employee of his new company and so miss out on the benefits of working there for a long time? That point is particularly relevant if he was employed, of course, before April 2008 and so is currently in the defined benefit scheme that is closed to new members. I beg to move.

Lord Faulkner of Worcester: I must advise the Committee that, if this amendment is agreed to, I am unable to call Amendment 52 for reasons of pre-emption.

Lord Clarke of Hampstead: Amendment 52 seeks to extend Clause 17(1) by adding, at the end of line 4, two specific points that will make the intention of the clause easier to understand. The first is:
	"If an order is made under subsection (1) which includes a provision for the division of the RMPP into different sections, it shall provide that the sections are segregated".
	The second point is:
	"For the purposes of subsection (1A), the sections of the RMPP are segregated if—
	(a) any contributions payable to the scheme by an employer in relation to the scheme or by a member are allocated to that employer's section; and
	(b) a specified proportion of the assets of the scheme is attributable to each section of the scheme and cannot be used for the purposes of any other section".
	Proposed new subsection (1C) makes it clear that:
	"For the purposes of subsection (1B), the Secretary of State shall be deemed to be an employer".
	Before I forget, I want to address the comment made to me by the noble Lord, Lord Skelmersdale, about my reference to privatisation. The Secretary of State can speak about public ownership until he is green in the face, but I will continue to describe the selling-off of part of Royal Mail as privatisation. It is all right to shake heads, but anybody with any interest in this matter will see that it is the thin end of the wedge. That is why some of us will fight to the end to prevent the privatisation of Royal Mail.
	To return to Amendment 52, which deals with segregation, Clause 16 is the method flagged up by the Government for dealing with the deficit. Assets of the scheme will be taken into the Consolidated Fund and matching liabilities paid through a new public scheme. Clause 17 provides an alternative. The existing Royal Mail pension plan will be carved up into sections like the segments of an orange. Each employer would have his own section for future service provision. Past service liabilities would be transferred to a further section sponsored by the Secretary of State. Something very similar was done when the railways pension scheme was set up. Each employer had his own section but there was a further section just for pre-privatisation pensioners and deferred pensioners, which the Government were responsible for.
	The point of the amendment should be uncontroversial. If a pension scheme is carved into sections, the sections can be segregated or remain unsegregated. Segregation means that the assets and liabilities of each section are ring-fenced. If the sections are not segregated, the assets of one section can be used to cross-subsidise another one. Amendment 52 requires a sectionalised scheme to be segregated. That means that if a section for qualified accrued liabilities is sponsored by the Secretary of State it cannot be cross-subsidised by the Royal Mail or Post Office companies. That means that the new companies, once they have their own sections, cannot be made responsible for the deficit that the Secretary of State has taken on. That is exactly what happened in the railways and electricity suppliers' scheme. I beg to move.

Baroness Turner of Camden: I support my noble friend Lord Clarke of Hampstead's amendment. He is attempting to deal with the problem also raised by the noble Lord, Lord Skelmersdale, in his amendment, but I find this rather more acceptable. It accepts that this section of the Bill allows for the RMPP to be divided into different sections. It then ensures that if a pension scheme is carved into sections, the scheme is segregated. The segregation, as I understand it, means that the assets and liabilities of each section are ring-fenced, and that is important.
	The amendment requires a sectionalised scheme to be segregated, which means that if there is a section for qualifying accrued liabilities sponsored by the Secretary of State, it cannot be cross-subsidised by the Royal Mail or post office companies. My noble friend Lord Clarke of Hampstead has found quite an ingenious way of dealing with the issues he raised when speaking to his amendment. I commend it to Members of the Committee.

Lord Skelmersdale: Before the Minister answers, is this a case where "may" means "shall"?

Lord McKenzie of Luton: The hour is too late. I start by picking up on the point made by the noble Lord, Lord Skelmersdale, about the current nature of the RMPP. The senior executive scheme is outwith the RMPP and not covered by the Bill, as with the DC scheme. Furthermore, although the RMPP scheme is described as divided into five sections, those are in fact just descriptions of the different pension arrangements in the plan. It is not currently divided into separate sections but is one plan.
	Clause 17, particularly subsection (1), allows the Secretary of State, by order, to divide the existing RMPP into different sections, for different participating employers to be in the different sections, and for assets and liabilities in the RMPP to be divided between the different sections. The Government intend that responsibility for rights accrued prior to 16 December 2008 will be transferred to the Government. We also intend that the strategic partnership will not include Post Office Ltd, which, in contrast to Royal Mail Group, will remain 100 per cent in public ownership. As a result, when the transfer of responsibility for qualifying accrued rights to the new government scheme and the restructuring of the Royal Mail Group take place, the RMPP will need to be divided so that there is a section for Post Office employees and another for Royal Mail Group employees. These sections will contain rights built up after the cut-off date for the transfer of liabilities to the Government. Post Office and Royal Mail Group will each be responsible for their own section.
	I should add that Post Office Ltd is currently staffed with people seconded from the Royal Mail Group, who participate in the current unsectionalised RMPP scheme. As part of the restructuring, such persons will be transferred to Post Office Ltd, and their pension provision in respect of benefits that arise after the qualifying time will be in a section of the RMPP for Post Office Ltd employees funded by the Post Office. After separation into sectionalised schemes, the transfer of employees between Royal Mail Group and Post Office Ltd will be an operational matter for the company.
	At the point of any transfer to a new government scheme, it is the Government's intention that the new sections for Post Office and Royal Mail Group will have sufficient assets to cover their current liabilities at that date. Clause 17 also provides the Government with a power to create further sections, separate from the sections containing the ongoing pension liabilities of Post Office and Royal Mail Group. This power could be used, as we have discussed, to create a section which contained qualifying accrued rights, defined in Clause 15.
	It is not the Government's intention to use the power for this purpose, other than in circumstances where it proved that the power provided in Clause 16 to transfer the qualifying accrued rights to a new scheme could not be implemented. A section created for this purpose would operate on a similar basis to the public service scheme created under Clause 16, and would not hold any assets. Benefits would be funded directly by the Government as they fell due, as provided for in subsection (2).
	The existence of this power is purely a contingency measure should, for whatever reason, the Government's preferred option prove impossible. Creating a new section for qualifying accrued rights would be quicker than creating a separate scheme under Clause 16, and there may be circumstances where this additional flexibility is advantageous. The remainder of the provisions in Clause 17 relate to the establishment of the new subsection for qualifying accrued rights.
	On Amendment 51, we need the power to sectionalise the RMPP to provide for different Post Office and Royal Mail Group sections. Maintaining Post Office Ltd in 100 per cent government ownership is a key part of the overall restructuring of Royal Mail. The Government therefore need the ability to ring-fence the Post Office and its pension liabilities.
	Amendment 52 concerns the segregation of the sections of the RMPP created by the Secretary of State. Under the Government's proposals, the sections would contain rights built up after the cut-off date for the transfer of liabilities to the Government. Post Office Ltd and Royal Mail Group would each be responsible for their own section. I reassure my noble friend that it is the Government's intention that any such sections would be segregated, with no scope for cross-subsidy so that, for important areas such as scheme funding and Section 75 debt legislation, each section will be regarded as an effectively separate pension scheme. This is very important, and the rules of the RMPP on sectionalisation will be amended to meet the conditions in the scheme funding, Section 75 and other pensions legislation that recognises that segregated sections in a sectionalised scheme are to be treated as separate schemes.
	Post Office Ltd should not, therefore, be liable for the Royal Mail Group's pension arrangements. Similarly, it would not be acceptable for the Royal Mail Group, including a partner, to be liable for pension arrangements relating to the Post Office. Neither the Royal Mail Group nor Post Office Ltd should be liable for any section containing qualifying accrued rights, which would be the responsibility of the Secretary of State.
	At the point of any transfer of liabilities and assets to the Government, the Government intend to leave the sections of the RMPP with sufficient assets to cover their liabilities at that date, as I have stated. Going forward, the intention is that the assets and liabilities in each section will be attributable only to that section, and that each section would carry out its own separate actuarial valuations. Assets in one section should not be transferable to any other section.
	The Government intend to discuss with the trustees and the company the most appropriate governance for the new sections going forward before a final decision is made. One option is that the existing trustees of the RMPP continue to act as trustees for the different sections of the RMPP, which involves the least change for members, with members of the Post Office section represented on the trustee board.
	I hope that for once I have been able to satisfy the proposition that each noble Lord has advanced in dealing with these amendments. Therefore, I am confident that the amendments might not be pressed.

Lord Skelmersdale: To sum up, "may" does mean "shall". Good, at least we have got that clear. The Minister has indeed satisfied me, except in one major respect: he has not settled the argument between the noble Lord, Lord Clarke, and myself on whether we will end up with a privatised company. The Minister is an accountant so he should know exactly what a privatised company is as opposed to a public company. Having said that, I hope that he will satisfy me on that point on another amendment. In the mean time—

Lord McKenzie of Luton: To clarify that point, the Secretary of State speaks for the Government on that issue.

Lord Skelmersdale: It is very unlike the noble Lord to duck a challenge like that. I beg leave to withdraw the amendment.
	Amendment 51 withdrawn.
	Amendment 52
	 Tabled by

Lord Clarke of Hampstead: 52: Clause 17, page 9, line 4, at end insert—
	"(1A) If an order is made under subsection (1) which includes a provision for the division of the RMPP into different sections, it shall provide that the sections are segregated.
	(1B) For the purposes of subsection (1A), the sections of the RMPP are segregated if—
	(a) any contributions payable to the scheme by an employer in relation to the scheme or by a member are allocated to that employer's section; and
	(b) a specified proportion of the assets of the scheme is attributable to each section of the scheme and cannot be used for the purposes of any other section.
	(1C) For the purposes of subsection (1B), the Secretary of State shall be deemed to be an employer."

Lord Clarke of Hampstead: I should like to comment on this amendment. I do not know whether that is out of order; I shall be told if it is. I thank my noble friend Lady Turner for once again showing her years of experience of dealing with these matters at the TUC and for bringing that useful experience to the debate. In the mean time, I shall look at what has been said.
	Amendment 52 not moved.
	Amendment 53
	 Moved by Lord Skelmersdale
	53: Clause 17, page 9, line 5, leave out subsection (2)

Lord Skelmersdale: Amendments 53 and 54 probe the provisions in the Bill providing for further payments from the Secretary of State to the RMPP. I am sure that the Minister has eagerly anticipated this debate because it is one area of the Bill where I am sure that his Back-Benchers will agree with him, and oppose the Opposition—I am speaking for the Opposition—which must be a pleasant change.
	With this Bill we are spending billions of pounds of taxpayers' money to rescue a company that has allowed its pension fund deficit to grow to completely unmanageable proportions. Earlier in our debates the noble Lord, Lord Hoyle, commented on two past events that affect that deficit. The first was the pensions holiday, which was not brought in by the Government of the day but was insisted on by the then Inland Revenue, otherwise it said that it would tax the surplus, which was not considered by the Post Office or any other pension scheme to be a reasonable thing to do.

Lord Hoyle: My whole point about the pension holiday was that it went on far too long.

Lord Skelmersdale: It is easy to be wise after the event. Had we known what the effects would be, I do not think that any of us would have resiled from giving the Inland Revenue the instruction not to be so silly. I think we have all learnt from those days. I, for one, hope that it will never happen again, and I hope that I have agreement across the Committee on that.
	The second point that the noble Lord was making—I cannot remember the exact phrase that I used to use 20-odd years ago—was on the £300 a year that the Post Office paid into the government coffers. Again, that went on for some years—

Noble Lords: It was £350 million.

Lord Skelmersdale: I am talking entirely from memory. Again, that was seen to be a mistake and was eventually stopped.

Lord Hoyle: When I was in the other place and it appeared before the Trade and Industry Committee, we always used to complain about what the Treasury was doing in relation to that.

Lord Skelmersdale: That may well be, but that is not part of my experience, unlike that of the noble Lord. Surely to goodness, as time goes on we should all learn from our mistakes, whether we were in opposition and are now in government or the other way around. I hope that the noble Lord, Lord Hoyle, would agree with me on that.
	With this Bill, we are spending billions of pounds of taxpayers' money to rescue a company that has allowed its pension fund to grow to completely unmanageable proportions, not only for those reasons, but for others. The deficit is the largest accounting deficit of any FTSE 100 company, and it is being carried by a postal company with the lowest operating profit margin in western Europe; both those points are according to Hooper. I suppose I am about to be challenged by the noble Lord, Lord Clarke, on that as well, in which case, I shall await the challenge.
	We agree with the Government that the rescue is necessary; the alternative, of sitting on our hands and letting a major pension fund close, possibly bringing down the PPF with it, is completely unacceptable. This regrettable necessity does not mean that we are particularly happy about having to spend billions of pounds of taxpayers' money in this way. The Secretary of State has accepted that the price for this bail-out is the part-privatisation of Royal Mail. One would hope that the company is transformed sufficiently to prevent this ever happening again. We on this side of the Committee agree that after this Bill is passed and the reorganisation is completed, Royal Mail should be able to fund the remaining liabilities in its fund and successfully manage the new ones that it will accrue over time. The Secretary of State's policy paper said that,
	"taxpayers will have the certainty that it is Royal Mail that will bear the full cost of future pensions provision for its current employees and costs relating to future salary increases".
	Again, we agree that this certainty is a critical part of the Bill.
	What are these powers for? The provisions as they stand make a nonsense of that certainty. Why is the taxpayer continuing to fund the RMPP? Once again, the Bill's supporting documents are rather unhelpful. The memorandum to the DPRRC speaks of this power being used to comply with EU state aid requirements and gives no other possible use. Frankly, the possibility that the Government's policy will need to be altered because of EU rules is becoming an excuse for an awful lot of the very wide and very worrying provisions in this part of the Bill.
	The memorandum is further confused by a throwaway reference, concerning Clause 15, to the possibility that the Secretary of State will set up a section of the RMPP to hold qualifying accrued rights that will be paid off by the Government. Thus it appears that the Government are not even wedded to the idea of a Clause 16-based new public scheme.
	I am desperately confused, and this level of confusion and contradiction, unless explained, is unacceptable. If the power is to be used only for tidying up, it should be limited to such a use. However, if the Government intend to allow further subsidy of the RMPP beyond what they have announced, they should be honest about that, and above all, should place restrictions on this power in order to ensure proper scrutiny. I beg to move.

Lord Clarke of Hampstead: I did not interrupt the noble Lord, Lord Skelmersdale, although I was invited to do so. However, unlike others who do not accept a challenge, I do.
	The question was asked about why the taxpayer should pick up the tab for the deficit. It is a legitimate question. On Second Reading, my noble friend Lord Haskel said:
	"If the Government are going to fund the pension scheme deficit, they should do so because it is morally right because of responsibility and because of undertakings given in the past".—[Official Report, 10/3/09; col. 1084.]
	That was well said.
	Reference has been made in this short exchange to the pensions holiday. I have referred to this on a number of occasions and it bears repeating. There is much talk about the poor old taxpayer. I sympathise with anybody who pays tax, especially in these times of credit crunch. However, the responsibility lies clearly with both the former Tory Government and the Labour Government for allowing the pensions holiday to go on.
	It was said as an aside that we learnt too late. However, within one year of that holiday, I was on my feet with the Royal Mail and the pension fund, saying, "This is wrong. You should be putting away that money for a rainy day". My general secretary pulled me up on one occasion for being—unusually for me—quite direct to the employer. I said clearly, "This cannot go on. Our members are paying 6 per cent of their wages every week. You are giving nothing. If you are making this money, put it in a pot so that when there is a rainy day, we will be able to use it"—as the trust deed stipulated.
	For 13 years, post office workers paid. They also contributed large amounts of money through the external finance limit. In my time as an officer of the union, it was £2 billion. If you consider that alongside the pensions holiday, and the political pressures on tariffs, and the pressures on managers, you do not ask, "Why should the taxpayer pay?", but say, "Thank goodness that somebody had the sense to see, as the noble Lord, Lord Haskel, said, what is morally right".
	The Secretary of State replied to my noble friend Lord Haskel. His answer was not so clear-cut, but he started by agreeing that:
	"My noble friend Lord Haskel rightly suggested that as a Government we are morally obliged to fund this pensions deficit".—[Official Report, 10/3/09; col. 1132.]
	There is no dispute. The Government have a moral obligation, yet this clarity is immediately muddled. Noble Lords in the Chamber have listened to talk about taxpayers, with whom I sympathise—especially because, at this period of our economic history, there is not much money about. However, one has to balance this with the sacrifices made over those years, and the absolute stupidity of management and both Governments who did not see that they were frittering away money that would have been very useful when the rain started to pour.

Lord McKenzie of Luton: This has been an interesting debate which has strayed beyond the specifics of the amendment. I shall just say this in relation to the pensions holiday: it was my understanding that the legislation of the previous Government put pension schemes in this position. That may have not been dealt with early enough by a subsequent Government. I was interested in the comment that the position was forced upon the Government by the Inland Revenue. That was an interesting perspective put by the noble Lord.
	The pensions holiday is a matter of fact. There was a long period during which contributions were not made into the scheme. It is difficult to discern what the subsequent funding arrangements might have been after the 2003 triennial valuation, had there been more funds in the scheme in the interim. However, that is history and we are where we are.
	The noble Lord, Lord Skelmersdale, talked about longevity. If you look at the pensions landscape, we know that the challenges facing DB schemes generally have been created by issues around longevity and a period of unrealistic expectations from asset prices. The commission of the noble Lord, Lord Turner, made that very clear, but we are where we are. The big challenge regarding the RMPP, whether or not it had been fully funded on day one, is the size of the scheme in relation to the business supporting it. For these arrangements to renew, for the Government to take over accrued rights, to slim down and to fully fund the scheme are very important to sustain opportunities going forward.
	Let me deal with the detailed amendments. The Government's intention is for qualifying accrued rights to be transferred from the RMPP to a new public service scheme. Subsection (2) covers the scenario whereby if qualifying accrued rights remain in a section of the RMPP, the Secretary of State is allowed to make provision for the making of payments to the trustees on a pay-as-you-go basis in relation to qualifying accrued rights.
	As I explained earlier, the existence of this power is purely a contingency measure should, for whatever reason, the Government's preferred option prove impossible. Creating a new section for qualifying accrued rights would be quicker than creating a separate scheme under Clause 16, and there may be circumstances where this additional flexibility is advantageous.
	The remainder of Clause 17 relates to the establishment of the new subsection for qualifying accrued rights. That is why those provisions are there. It is not for other sections of the RMPP. For example, subsection (3) allows the Secretary of State to include provision for increasing the benefits payable in respect of qualifying accrued rights in prescribed circumstances. This is similar to the equivalent provision at Clause 16 and is required to match the indexation of benefits currently provided for under the RMPP.
	Subsection (3)(c) is needed to allow the Government to make payments to the trustees to cover any additional discretionary benefits for members. Discretionary benefits include agreements to grant members enhanced benefits as regards ill health or early retirement. The exercise of discretionary powers by the trustees would require the Secretary of State's consent under subsection (3)(b).
	I should stress that these provisions relate only to a new section of the RMPP created for the purpose of containing the qualifying accrued rights and for no other purpose. They do not relate to the other sections of the scheme relating to Royal Mail Group and Post Office Ltd. The ability to create a new section for the qualifying accrued rights is an important contingency measure, but it is not the Government's preferred option. If the Government are able to transfer the QARs to a new scheme, as envisaged under Clause 16, these provisions will not be required.
	I hope that that explanation will help noble Lords and will enable the noble Lord, Lord Skelmersdale, to withdraw the amendment.

Lord Skelmersdale: We have had an occasion where "may" meant "shall", and now "may" means "could". The noble Lord suggested in relation to the first of these amendments that subsection (2)(a) could be advantageous in certain circumstances, but he neglected to give me an example of circumstances where it could be used and could be beneficial. I grouped these amendments because you cannot have subsection (3)(c) without subsection (2)(a). They are inextricably entwined. I think that I now understand what subsection (2)(a) is getting at, although at some point, either now or later, I should be interested in an example, if the Minister can give it, of when such a thing could be advantageous.

Lord McKenzie of Luton: Perhaps I may try now. To recap, Clause 17 is about the division of the RMPP into different sections because of Post Office Ltd and so on. However, it is also about having, on a contingency basis, the ability to create a section of that scheme if, for practical or other reasons, it is not possible to set up a separate government scheme. If the unfunded scheme in respect of accrued liabilities cannot be put into a separate scheme, it may, or should, be possible to do it through a separate section of the RMPP. Obviously if that happens, given that that section will not have any investments in it, its ability to deal with those accrued liabilities will depend on the Government putting money into it and then dealing with increases. That is why it is structured on that basis. I hope that that helps the noble Lord. I can see that the alternative can be confusing, but it is an important fallback position, should we not be able to set up that separate scheme.

Lord Skelmersdale: I am grateful to the Minister. I think that I now have it, and I beg leave to withdraw the amendment.
	Amendment 53 withdrawn.
	Amendments 54 and 55 not moved.
	Amendment 56
	 Moved by Lord Clarke of Hampstead
	56: Clause 17, page 9, line 20, after "RMPP" insert "if the exercise of that power would increase the qualifying accrued rights of any member"

Lord Clarke of Hampstead: Amendments 56 and 57 are linked and they relate to the next group. Clause 17(3) would allow the Secretary of State to veto any discretionary decision made by a trustee of the Royal Mail pension plan. Discretionary decisions are decisions to amend the rules or increase benefits. They would include not only a power to grant an additional pension for reasons which might be viewed as suspect—for example, paying off a chief executive—but also decisions to grant an ill health pension on genuine medical grounds or to allow an immediate pension on the standard, more favourable terms already permitted by the Royal Mail pension plan that apply in the event of redundancy. It would include decisions made by a trustee, an employer or even a doctor.
	With the amendments, I accept that the Secretary of State's consent should be obtained if the cost imposed on him to fund qualifying accrued liabilities is directly increased. Any other discretion should remain with the trustee and/or employers participating in the scheme in the same way as currently exists under the rules. If the Secretary of State is not paying for the exercise of the discretion, why should he have a veto power? I beg to move.

Lord Skelmersdale: The noble Lord, Lord Clarke, rightly raises the possibility that the Bill would allow the Secretary of State to interfere in the RMPP to quite a significant extent. I agree that that is dangerous, so I should be interested to hear from the noble Lord, Lord McKenzie, just how much involvement he anticipates the Secretary of State having once the dust has settled. If these are to be emergency powers, designed to allow the Secretary of State to step in as the last resort, that is one thing. If, however, the trustees are to have the Government watching over their shoulder and trying to micromanage every decision they make about the ongoing scheme, that is quite another. For once, the noble Lord, Lord Clarke, and I must be in agreement on this.

Lord McKenzie of Luton: I thank my noble friend Lord Clarke for explaining his amendments. The intended use of subsection (4), like subsections (2), (3) and (5), is to cover the scenario of qualifying accrued rights remaining in a separate government-sponsored section of RMPP, as we have just discussed. This is the fallback position, not our preferred option. Qualifying accrued rights would be protected in this section with the Government making payments to the trustees as benefits fall due. We intend that subsection (4) would be used only in relation to this government-backed section of the RMPP. It allows for the Secretary of State by order to require his consent to the exercise of discretionary powers and amendments made to the scheme rules. The Government have no intention of applying this power of veto to the separate Royal Mail group and Post Office Ltd sections.
	Subsection (4)(a) concerns the exercise of discretionary powers. The trustees currently have discretion over the level of certain benefits that are paid to members. For example, under the RMPP rules, members can give up part of their pension in exchange for a lump sum, and the trustees have discretion over how that lump sum is calculated. Other discretionary powers include the power to grant early payment of a pension on grounds of ill health and the calculation of transfer values when a member chooses to move benefits to another scheme.
	In a section containing qualifying accrued rights that are paid for by Government it is appropriate that the Secretary of State's consent to the exercise of these discretionary benefits is required both to protect members' interests and the taxpayer. Amendment 56 recognises the need for the Secretary of State's power of consent but restricts it to where the exercise of discretionary power increases the qualifying accrued rights of members. However, this is not sufficient to protect the Government from incurring additional costs relating to the RMPP. An important distinction needs to be made that the RMPP does not define a level of qualifying accrued right that the trustees can then vary up or down but, using the example of a member exchanging his pension for a lump sum, a member's qualifying accrued rights will be the right to an additional lump sum assessed on a basis to be determined by the trustees. However the trustees decide to calculate the lump sum, qualifying accrued rights have not increased or decreased. For that reason we do not think that Amendment 56 is workable or provides sufficient protection for taxpayers and so the Government cannot accept it.
	Amendment 57 refers to subsection (4)(b). Currently the principal employer, which is Royal Mail Group and the trustees, may make amendments to the rules of the scheme. Going forward we would not expect Royal Mail Group to have any interest or powers in a section containing qualifying accrued rights, which will instead be backed by the Government. Without subsection (4)(b) the trustees would have unilateral powers over this section but there would be no protection for the Government and the taxpayer. Amendment 57 would again restrict the Secretary of State's power of consent to where amendments to the RMPP rules would increase the qualifying accrued rights of any member. The Government believe that that is too restrictive. The trustees could potentially amend the RMPP rules in a number of ways that would not increase a member's qualifying accrued rights but which would potentially impose a cost on Government. For example, the trustees could decide to make changes to the dates that payments are made to members or similar administration changes that do not increase a member's qualifying accrued rights, but which impact on the arrangements that the Government have for making payments to the trustees. It is appropriate that the Secretary of State can agree that the changes are sensible.
	I hope that I have reassured my noble friend that the Government intend to use the powers in subsection (4) only in relation to a government-backed section containing qualifying accrued rights. Given the difficulties with the amendments, I ask my noble friend not to press them.

Lord Clarke of Hampstead: I thank the Minister for his reply. I have said that I would take away what has been said and think about it. On this occasion I should like the Minister to think again about this power which I perceive to be a power of veto by the Secretary of State. If the new scheme is to be seen as transparent, fair and balanced, we must make sure that we do not give the impression of a veto power that lies in the hands of the Secretary of State, not in the hands of the trustees.
	In the spirit of the debates this evening, I ask my noble friend to think about what has been said about the amendment, with a view to making it absolutely clear that we are not giving the hand of government, whomever it happens to be, the power to administer things that really should be a matter of joint exercise and consultation between the parties before the powers are used.

Lord McKenzie of Luton: I very much understand my noble friend's point; perhaps I may reflect on whether we can have some enhanced reassurance.

Lord Clarke of Hampstead: One cannot ask for anything more. I beg leave to withdraw the amendment.
	Amendment 56 withdrawn.
	Amendment 57 not moved.
	Amendment 58
	 Moved by Lord Clarke of Hampstead
	58: Clause 17, page 9, line 22, leave out "may" and insert "shall"

Lord Clarke of Hampstead: Amendment 58 requires services contracted out to maintain a dispute resolution procedure, which I should have thought is fairly straightforward. Amendment 59 requires that the Royal Mail pension plan remains an occupational pension scheme under trust. We had a debate on that earlier.
	Clause 17(5) as drafted allows, but does not require, the Secretary of State to include provision allowing the scheme to remain contracted out and salary-related, and to have a dispute resolution procedure. There are two points here. First, a decision to contract in, to change the scheme to a defined contribution scheme, or to change the dispute procedure, should be made by the trustee as a rule amendment. The order should not interfere by permitting the Secretary of State to provide that it is not contracted out or not salary-related, or does not have a dispute process. That is why Amendment 58 states that "may" should be replaced by "shall".
	The second point is more important. Nothing in Clause 17 prevents the Secretary of State from changing the character of the Royal Mail pension plan as an occupational pension scheme established under trust. The pensions legislation applicable to pension schemes depends on whether the scheme is trust-based. A statutory scheme, such as the local government pension scheme, is not trust-based and has no trustees. Among other things, that would have the effect of stripping away the requirement to have member-nominated trustees. Amendment 59 limits the Secretary of State's power, so that he cannot make such a change. The scheme would have to remain trust-based and not become a statutory scheme or some other type of beast.
	I do not think that that is controversial. All similar schemes in the rail, coal, electricity, gas and water industries remain trust-based, even when they are sponsored in part by the Government. As matters currently stand, members have rights under a scheme sponsored by a limited company, and Royal Mail is wholly owned by the state. Royal Mail could conceivably go bust, but it is highly improbable.
	Such things must be taken into consideration and I hope that the Minister sees exactly why I believe that trusts, rules, regulations and governing bodies of pension schemes should be fair, even-handed and transparent. I beg to move.

Lord McKenzie of Luton: We have been discussing the Government's intention in Clause 17 to enable the Secretary of State to divide the existing Royal Mail pension scheme into sections. I have made it clear that the primary purpose of that is to allow the creation of a separate Post Office Ltd section to isolate the new partner from any of those liabilities. However, Clause 17 also provides the power to create a new section to contain the qualifying accrued rights. As we have discussed, that is a contingency option that would be adopted only if the establishment of a new scheme as envisaged under Clause 16 proved impossible to achieve on the required timescale.
	I welcome the intent behind Amendments 58 and 59 to Clause 17 at line 9 on page 22, both of which seek to clarify that, following a division of the RMPP into sections, the RMPP will remain a contracted-out, trust-based occupational pension scheme under the Pension Schemes Act 1993. However, having reviewed the effect of these amendments further, let me explain why they are unnecessary.
	Amendment 58 would make it a requirement on the Secretary of State to include a provision in any order that divides the RMPP into separate sections to ensure that the RMPP remains contracted out and to ensure that the order makes provision for determining a manner for settling any questions that arise under it. However, it may not be necessary for an order made under Clause 17 to require the RMPP to remain contracted out. This is because if, as is the Government's preferred option, the order were made solely to create a new Post Office section, and Post Office Ltd were to apply for a contracting-out certificate in the usual way, there would be no need for the Secretary of State to make any provision for this in the order. In those circumstances, the requirement implied by the amendment is unnecessary.
	If the Government were to adopt their contingency option in respect of the qualifying accrued rights and transfer these to a new section in the RMPP, the Secretary of State would need to ensure that that new section remained contracted out. This power would be required because, unlike the existing scheme or the proposed new sections for Post Office Ltd and Royal Mail Group employees, any new section for the qualifying accrued rights would not be established by an employer for its employees. As we discussed earlier in our debate on Clause 16, the HMRC would not normally issue it with a contracting-out certificate. If the new section was not contracted out, that would restrict the transfer of contracted-out benefits between the RMPP and the new section. It would also prevent transfers between the new scheme and other contracted-out schemes—as would be required if a member of the new scheme wished to transfer their accrued benefits to another scheme.
	The existence of the option to create a new section in the RMPP for the qualifying accrued rights, and the fact that it is only an option, means that the powers in the Bill give the Secretary of State the ability to make provisions for contracting out but do not require it. In other words, the amendments would require the Secretary of State to make a provision that may not be needed.
	Similarly, the Government envisage that existing requirements for a dispute resolution process could continue to apply to the RMPP after it is split into sections and have no intention of changing this process under the RMPP. Subsection (5)(b) is intended to provide a facility to help to determine questions that might arise: for example, over which assets, liabilities or benefits fall to be paid from which section of the scheme. It is not intended to override more general dispute resolution procedures.
	Amendment 59 would require that the RMPP remains a trust-based occupational pension scheme, as defined in the Pension Schemes Act 1993, after sectionalisation. Again, we see no need for such a requirement. We envisage that the RMPP will continue to be an occupational pension scheme. There are no powers in Clause 17 that enable the Government to change the current trust basis of the RMPP, and there would be no reason for the Government to take any such action in connection with an order under Clauses 16 or 17. I reassure noble Lords that the Government have no intention of requiring a change to the current trust structure of the RMPP. I hope that that provides my noble friend with the reassurance that he seeks through his amendments.

Lord Clarke of Hampstead: The Minister has reassured me that I was on the right track before. He has not changed his position, and I have not changed mine. This should be a trust-based scheme. There may be an opportunity a bit further down the road to do this. It is a bit odd when a Government such as ours cannot see the need to have a dispute resolution procedure as Amendment 56 suggests. I make no bones about it. These amendments are intended to restrict the powers of the Secretary of State.
	To my certain knowledge, we have had 63 years of political interference in the running of the Post Office. If these powers are unrestrained then there will be further interference. If I am wrong about that, I would simply ask the Government to include in the legislation a form of words that can dissuade me and others of like mind that this provision will not give undue powers to the Secretary of State to the detriment of the trustees or the members of the scheme. The Minister has not convinced me. I did not think that he would. I suppose that he is not surprised that I am not convinced. Having said that, I will look at what the Government say in trying to assuage the fears of those who do not want this super-power to be invested in the Secretary of State. I nearly said the Superman but will quickly retract that. For the moment, I beg leave to withdraw the amendment.
	Amendment 58 withdrawn.
	Amendments 59 and 60 not moved.
	Clause 17 agreed.
	Clause 18: Amendments of the RMPP
	Amendment 61
	 Moved by Lord Clarke of Hampstead
	61: Clause 18, page 9, line 37, at end insert—
	"( ) No order may be made under this section unless—
	(a) the consent of the trustee of the RMPP has been obtained, and
	(b) the Secretary of State has consulted the members of the RMPP and such representatives of members of the RMPP as appear to him to be appropriate."

Lord Clarke of Hampstead: This may take longer. Amendment 61 is necessary because under Clause 18 the Secretary of State is given the power to amend the RMPP without constraints. The apparent purpose is to permit him to amend the scheme so that service before and after transfer is treated as one. The amendment would give the trustee a veto power. If the amendment is in the best interests of the scheme or the scheme members, the trustee's consent will be forthcoming. I am sure that we are all reasonable people. It would impose an obligation to consult, which is no more than the statutory obligation that already exists if an amendment affecting benefits were to be made by the trustee rather than the Secretary of State.
	The source of this obligation is the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006. I said that this amendment may take some time. That is because last Tuesday we had some exchanges on consultation. The Minister, the noble Lord, Lord Tunnicliffe, said that "while the sentiment" behind the amendment on consultation,
	"is worthy, we think that it is unnecessary and burdensome".
	At the time we were talking about TUPE, but what concerned me then, and what concerns me now, was when he said:
	"This consultation is carried out by the relevant employer. This is the correct level for such consultation. To require the Secretary of State to consult the company and its employees over and above this would only cause unnecessary delay and uncertainty for those affected".—[Official Report, 24/3/09; col. 646.]
	We heard quite a lot earlier about the need to keep people informed. We should do anything we can to assist in consultation and understanding. In that debate, I said:
	"It is paradoxical for a member of the Labour Party like myself, with a long history of being a member of a trade union, to find that the Government resist Amendment ... which simply calls for consultation".—[Official Report, 24/3/09; col. 648.]
	It is simple: you talk to people, you work out the differences and you come to conclusions. Consultation is often misguided. In a number of places, it is dictation. The guise of consultation is used, but people ultimately take it or leave it. I believe that consultation in the proper sense is necessary.
	I said to the noble Lord, Lord Hunt of Wirral, that the Bill should address consultation and the vital need for the exchange of information and for understanding. I said it then and I repeat it now. At col. 648 I declared that if he walks through the Lobby in pursuit of consultation, I will join him "shoulder to shoulder", because it is that important.
	Later on, the noble Lord, Lord Hunt of Wirral, moved his amendment to Clause 8 on consultation. My noble friend Lord Tunnicliffe tried to be helpful to the noble Lord by saying:
	"I am not giving a general statement on the extent to which there will be wider consultations with employees when the restructuring takes place. That is obviously something that we will consider in the light of this debate and in the light of how the project develops. I hope that that allows the noble Lord to delay seeking to test the opinion of the Committee".—[Official Report, 24/3/09; col. 649.]
	It did not persuade the noble Lord, Lord Hunt, at the time and it certainly would not have persuaded me. A Division was called, and lo and behold, with the Government pushing this privatisation Bill—I expect that my saying that will upset the noble Lord, Lord Skelmersdale—they managed to get a majority of five votes. At least five of my colleagues, including myself, abstained. If it comes to it, I will be there pursuing the principle of consultation. It is a vital part of any industrial relations activity and important to most of society when contracts are being worked out. There is nothing wrong with consultation; it is not something that is naughty, indeed it is essential. I beg to move.

Baroness Turner of Camden: I rise to support my noble friend's amendment because, as he points out, the powers that are given to the Secretary of State are quite unconstrained, and I do not think that that is acceptable in the present circumstances. Even if my noble friend does not like the exact wording of the amendment, I hope that he will consider that something has to be done to amend this part of the Bill. It is not acceptable to have a situation where the power to amend the RMPP is entirely without constraint. Apparently its purpose is to permit him to amend the scheme so that the service performed after the transfer is treated as one. Whether that is the reason, I do not know, but simply to have a provision conferring a totally unconstrained power to amend the RMPP is not acceptable. I also support what my noble friend said about the right and the necessity to consult. Particularly as far as pension provision is concerned, you simply cannot have a situation where the scheme can be amended without any constraint at all.

Lord Skelmersdale: What makes it even worse is that it would be amended by negative resolution. So I agree with the point just made by the noble Baroness, Lady Turner. My amendments in this group also deal with the issues of transparency and scrutiny. I have mentioned these issues already today in respect of several specific parts. Amendment 79 is a general catch-all amendment to raise the issue of the complete lack of any parliamentary role in the taking of decisions that affect not only the amount of liability the taxpayer takes on but also the ongoing health of the RMPP. Many of the powers in this part are, as we have heard, intended to be used for adjustments and technical matters. If that is the case, I agree that the negative procedure is correct, although we will continue to try to persuade the Minister that the purposes of each part should be much better clarified. However, many of these powers are enormously influential and their initial use will be critical, especially in view of the extraordinary amount of flexibility that the Government are insisting on in these provisions. It is our view that these crucial powers should be subject to the affirmative resolution procedure to give Parliament the chance to assess the effectiveness of the new public scheme and to ensure that the Clause 19 safeguard has been met.
	Amendment 78 relates to the requirement in Clause 24 that the Secretary of State should consult the trustee of the RMPP before making any order under Clause 16(1) or (2) or under the other clauses in this part. My amendment seeks to ensure that the results of any consultation are made public. It should be made clear if the Secretary of State is knowingly going against the trustees' recommendation.
	The amendment in the name of the noble Lord, Lord Clarke, goes a little further than my Amendment 78 by requiring not only consultation with the trustees but their consent. As I have said, it is a serious matter if the Secretary of State disregards the advice of the trustee charged with protecting the interests of the members. However, a requirement for the Secretary of State to consult individual trustees of the various schemes and to get their consent is probably overkill. In what circumstances can the Minister imagine acting without consent?
	Similarly, we have already discussed the concerns felt among current members because of the Government's inconsistency about their intentions. We should certainly ensure that members are properly informed about any changes in future. I may have more to say, depending on the Minister's answer.

Lord Razzall: We ought to have consensus in your Lordships' House on this issue. I do not know whether the drafting is correct or whether the amendment tabled by the noble Lord, Lord Clarke of Hampstead, meets the point that the Government should concede, but I hope the Government will take on board the general principle enunciated by the noble Lords, Lord Clarke and Lord Skelmersdale. As the noble Lord, Lord Clarke, and the noble Baroness, Lady Turner, have indicated, consultation in the context of these quite delicate but important issues for pensioners is an important principle. If the Government do not like the wording of the amendment, I hope that they will come back on Report with one that reflects that point. There is consensus here, and I hope that the Government will feel able to reflect that.

Lord McKenzie of Luton: We should differentiate between consultation and the concept of consent. The noble Lord, Lord Skelmersdale, picked up that particular sticking point in my noble friend's amendment. The Government agree with the importance of consultation around these issues, and I will come on to that in a moment.
	With great respect, I disagree with my noble friend Lady Turner, who said that the power to amend the RMPP was unconstrained; it is not. Clause 18 states that it can be amended but only in connection with an order made under Clauses 16 or 17, and the provisions under Clause 18 are constrained by the protections in Clause 19. So it really is not right to say that the power is unconstrained.
	As we have heard, Amendments 61 and 78 both relate to the consultation the Government intend to undertake in implementing these pension proposals. Amendment 61 refers to the powers under Clause 18 that allow the Secretary of State to make the necessary amendments to RMPP in connection with the transfer of qualifying accrued rights to a new public service scheme and the creation of a new Post Office section. These powers are needed to ensure that the changes are fully effective and that the overarching requirement for the protection of scheme members against adverse treatment can be fully met. I am sure noble Lords will welcome that.
	For example, the creation of a new section for Post Office employees will require a number of changes to address the funding, investment and governance arrangements for the new section. Amendments to the rules are likely to be needed to confirm that Post Office Ltd rather than Royal Mail Group will exercise the powers and have the obligations of a sponsoring employer under that section, and that none of the Post Office section assets can be used to meet Royal Mail section liabilities and vice versa. To safeguard members still in service it will be necessary to amend the rules of the RMPP to ensure that the overall payments to members from the RMPP and the new scheme are at least as good after the transfer as they were prior to it. The amendment quite rightly seeks to probe the Government on how they intend to consult before making any such amendments.
	Clause 24 already provides that, before making any order to amend the RMPP, the Secretary of State must consult the trustees of the RMPP. That applies in the same way as it does to other orders under Part 2 of the Bill. I reassure the Committee that the Government have every intention of working very closely with the trustees, and indeed have already been in regular discussion with them on the detailed proposals provided for in the Bill. That will continue as the relevant secondary legislation is drafted, which we envisage will be starting soon.
	In addition to consultation, Amendment 61 would require the consent of the RMPP trustees before any amendments could be made to the plan. That would place a significant onus and responsibility on the individual trustees of the RMPP to make a decision in relation to an order proposed by the Secretary of State. We do not consider that to be appropriate; the ultimate decision on the detail of an order laid by the Government must rest with the appropriate Secretary of State. As I have said, it is absolutely right that in taking that decision the Secretary of State must consult the trustees.
	The second part of the amendment seeks to require the Secretary of State to consult directly, as he or she considers appropriate, members of the RMPP and representatives of its members. I should start by saying that the Government have already met representatives of current employees and pensioners to explain the proposals in the Bill, and intend to keep these organisations informed as the Bill progresses. Furthermore, as I have just explained, we are consulting the RMPP trustees. The trustee body currently includes five member-nominated and union-nominated representatives, and I am sure that the trustees already have mechanisms in place for communicating with scheme members. We continue to discuss with them and Royal Mail how they should best engage with current employees and other scheme members. It would not make sense for the Government to duplicate such activity.
	I turn to Amendment 78. The requirement in Clause 24 for consultation with the trustee of the RMPP is an important safeguard for members of the scheme. It reflects the trustee's key role in ensuring that current members of the RMPP are protected, the Government's need for assurance that the proposed measures will be fully effective and the need for close co-ordination between the new public service scheme and the RMPP in future, particularly in respect of active members of the RMPP.
	As I said, the Government are working closely with the trustee in relation to the development and implementation of the detailed proposals provided for in the Bill. That will continue as the relevant secondary legislation is drafted, which we envisage will be starting soon. We will welcome the detailed scrutiny and engagement of the trustees as part of that process.
	The Government will summarise the key points of that consultation and its outcome in the relevant Explanatory Memorandums that will accompany any statutory instruments, in line with the guidance in Statutory Instrument Practice. However, we do not support the effect of Amendment 78. The process of consultation must be effective and meaningful and the results should be properly understood and disseminated, but the Government would not wish the process of detailed consultation with the trustees on the draft regulations to be distorted by a rigid process around the preparation of formal proposals and responses, as this amendment effectively proposes. In our view, that would act as a constraint on both parties and would add little value to the process.
	Instead, for consultation to have the benefits that are intended, it will need to be detailed and continuous. There will need to be effective engagement and ongoing dialogue between the trustees and the Government, including at a technical or working level. That is certainly our expectation, and we believe that it also reflects the expectations of the trustees. That is also consistent with the Government's Code of Practice on Consultation.
	I turn to the detail of Amendment 79. In consideration of earlier clauses in Part 2, the Government have explained the reasons why it is necessary for much of the detailed implementation of their proposal in respect of pensions to be through secondary legislation that will be made by the Secretary of State. I hope that the detailed scrutiny of the powers has been helpful in explaining how and for what purpose it is intended that those powers should be exercised. In addition, it has highlighted the significant protection for members offered by Clause 19, which directly constrains the key order-making powers.
	The amendment proposes changing the procedure for parliamentary approval of orders made under Part 2 from negative to affirmative. The Government do not consider the affirmative procedure to be the better option and cannot support the amendment. They believe that the negative procedure is justified by the significant protections in the Bill relating to how and for what purposes those powers can be exercised. It is also consistent with the procedure used for comparable measures in earlier legislation; for example, Section 106 of the Electricity Act 1989 and Section 33 of the British Telecommunications Act 1981.
	The Government's proposals for use of the negative resolution procedure in this respect have been endorsed by the Delegated Powers and Regulatory Reform Committee, a committee by which I know the noble Lord, Lord Skelmersdale, places great store. Noting the arguments both for and against the use of a negative procedure, the committee concluded in its report that,
	"in view of the great majority of precedents, the Committee is content that the negative procedure is not inappropriate for instruments under these powers".
	In light of my explanation, I invite noble Lords not to press their three amendments.

Lord Skelmersdale: I am not surprised that the Minister referred to the report of Delegated Powers and Regulatory Reform Committee, but given that the Government will not, for quite acceptable reasons, accept my Amendment 78 to Clause 24, Amendment 79 becomes even more important. The DPRRC noted that the provisions are "slightly unusual" and that,
	"the pension arrangements have attracted a certain amount of public attention"—
	you can say that again. It confirmed that there was a case for the first use of the more significant powers needing the affirmative process even if there are enough precedents of the negative procedure to make it difficult for it to insist. Is the Minister giving a commitment that he and his colleagues have decided that they will always follow the DPRRC's recommendations in future? We frequently hear from Ministers about why there are certain exceptional reasons for the committee's recommendations to be disregarded—the Government frequently break with precedent by forcing through extensive and unprecedented Henry VIII powers, for example. Is the Minister now insisting—I cannot resist this final tease—that the committee's arguments were wrong?

Lord McKenzie of Luton: If the noble Lord is asking whether we should always follow the recommendation of the committee, I am bound to say that there are bound to be exceptional circumstances where one might take an opposite view. I would not accept that this is one of them.

Lord Skelmersdale: It is not a time of night to divide the Committee, but I am extremely tempted to do so on the question of whether the first use of the regulations should be affirmative and thereafter negative. However, this group of amendments is headed by that of the noble Lord, Lord Clarke. It will be interesting to hear what he has to say, but I would advise him that this is not the right time to divide the Committee.

Lord Clarke of Hampstead: Could the noble Lord repeat that? It is not the right time to do what?

Lord Skelmersdale: I said that I would advise the noble Lord, and he is perfectly free to ignore my advice, not to divide the Committee at this point.

Lord Clarke of Hampstead: As if I would ever ignore the noble Lord's advice. It has been a good debate. Courtesy dictates that I should thank those people who have contributed to it. My main concern was the powers of the Secretary of State. I say with respect to my noble friend Lord McKenzie that Clause 18(1) grants a pretty sweeping power. It states:
	"The Secretary of State may by order make such amendments of the RMPP as the Secretary of State considers appropriate".
	That is pretty powerful stuff, for somebody to be able to go and do these things unrestrained, but it is late and we have to get on to some very meaty stuff later on.
	I am sorry that the Secretary of State is not here, because I have drafted a number of questions about consultation between him and the chairman of the Post Office pension fund. I shall return to them, because they need to be answered. A sequence of events surrounding the letter from Miss Jane Newell and her subsequent retraction of some of its implications needs to be aired publicly and responded to. That is for another time, but the Minister might like to tell his colleague that that is coming later.
	The noble Lord, Lord Razzall, as usual put a very important point. If there is a desire to be open and transparent, consultation is vital. I welcome the idea that, if there is consensus, we should put it in the Bill. We do not need Explanatory Notes or someone to give us guidance; we want it in the legislation that consultation on a number of issues that we have dealt with so far is important and essential if we are going to make this thing work.
	I am not going to go on. So many things have been said. I certainly will not be dividing the Committee tonight, although if the noble Lord, Lord Hunt, was to tempt me by going through on consultation I probably would, because I abstained last time, which is a bit of a cowardly way of doing things. That may happen, if push comes to shove and the Government cannot see this—especially a Labour Government, based on the traditions of the interchange of ideas and listening to people. We used to say that we were a listening party, like that bank that was always listening to somebody, although the banks have not listened very much recently. I suggest that the Minister goes away and brings back something in the Bill that guarantees consultation on these vital points.

Lord McKenzie of Luton: I do not want to end on a point of confrontation, but Clause 24 says:
	"The Secretary of State must consult the trustee of the RMPP before making—
	(a) an order under section 16 which contains provision establishing a new
	public scheme ... or
	(b) any order under any other provision of this Part".
	The idea is embodied there, and we need to take the opportunity to flesh out the process of all that. I am happy to work with my noble friend to do that. There is a requirement in the Bill at the moment, and I urge him not to overlook that fact.

Lord Clarke of Hampstead: I thank the Minister for that. Of course, I would not overlook it. If you went through the Bill you might find one or two things that you could pray in aid on this one, but in Clause 18(1) the Secretary of State has the only power to make these amendments. However, as it is getting late and we want to get on to other matters, I beg leave to withdraw the amendment.
	Amendment 61 withdrawn.
	Amendment 62 not moved.
	Clause 18 agreed.
	Clause 19: Protection against adverse treatment
	Amendments 62A to 69 not moved.
	Clause 19 agreed.
	House resumed.

House adjourned at 10.18 pm.